Brexit: What's Next? (w/ Marko Papic) | Real Vision™

TL;DR

The UK leaving the European Union will have immediate effects on UK assets, with a potential decline in the pound. The "who's next" mindset will affect European assets, but the market may perceive it as a buying opportunity. Populism in Europe is mutating and not necessarily threatening the euro area.

Transcript

so let's talk now about what happens if the UK does leave I think the immediate question is about UK assets you know the pound we've done some modeling as everybody else is done for whatever modeling is worth you know maybe eight to twelve percent decline the pound I think I'm much more interesting argument would be that there's associated effects ... Read More

Key Insights

• 😀 UK assets, particularly the pound, may face a decline of 8-12% if the UK leaves the EU.
• 📼 The market may perceive the situation as a buying opportunity for undervalued assets.
• 🇪🇺 Populism in Europe is mutating, where countries like Spain and Italy are not fully advocating for leaving the euro area.
• 🇪🇸 The "who's next" premium affects peripheral yields in countries like Spain and France.
• 🌐 Chinese devaluation could have unintended consequences in the global market.
• 🌍 The mutation of populism in Europe provides some comfort to investors.
• 💪 The UK and the US may have a stronger desire for change compared to continental Europe.

Questions & Answers

Q: How will the UK leaving the EU affect UK assets?

There may be an 8-12% decline in the pound's value, which can benefit UK exporters in the FTSE 100. Footsie 250, on the other hand, will face challenging domestic conditions.

Q: What is the "who's next" mindset and how will it affect European assets?

The "who's next" premium refers to the speculation of other countries leaving the EU. This mindset can cause an increase in peripheral yields, such as those of Spain and France. This could negatively impact European assets.

Q: Should investors be concerned about populism in Europe?

The mutation of populism in continental Europe is less threatening to the euro area. While countries like Spain and Italy may see a rise in anti-establishment parties, they are not fully advocating for a complete break with the status quo. This provides some comfort to investors.

Q: Will the "who's next" premium create a buying opportunity for European assets?

Yes, the perception of the "who's next" premium could actually create a buying opportunity. Investors may see potential in European assets that are undervalued due to uncertainty, especially if they believe that other countries are unlikely to leave the euro area.

Summary & Key Takeaways

• The UK leaving the EU could cause an 8-12% decline in the pound, benefiting UK exporters within the FTSE 100.

• European assets, especially government bonds, may be affected by the "who's next" mindset.

• The market may perceive the situation as a buying opportunity due to the lower likelihood of other countries leaving the euro area.