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11.12.2019 28

UK election could pave the way for an orderly Brexit and a rebound in equities


11 December, 2019

< 5 minutes
UK election could pave the way for an orderly Brexit and a rebound in equities

11 December, 2019

< 5 minutes

The essential

Possible scenarios: The possibility of seeing a smoother, faster Brexit will depend on the outcome of the UK election on Thursday, 12 December.
Investment implications: Based on the potential for a Conservative government, we believe that the probability that a Brexit deal is ratified is now about 80%. As alternative scenarios, there is also the lower potential that the UK remains in the EU (15%) or of a Hard Brexit (5%). Under the main scenario, the 10Y Gilt yield could move up from the current levels, remaining below 1% at the end of 2020. We still see room for the GBP to rebound in the short term, although the outlook for the medium term is less compelling. On the equity side, a stable government could drive a re-rating of the UK market, which is currently trading at discount to the EU and global markets. We remain positive on the more UK-focused domestic names: house builders, consumer discretionary stocks and financial companies.

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