The pound and UK financial assets will be volatile in the run-up to Britain’s first December general election since 1923 – and will remain so in the event of another hung parliament.
This is the warning from Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory organizations, as opposition party Labour announces it is now backing the government’s bill for aDecember election, regardless of the date.
Mr Green comments: “This is a critical stage in the slow-moving, damaging, torturous Brexit saga.
Seth Klarman Tells His Investors: Central Banks Are Treating Investors Like “Foolish Children”
"Surreal doesn't even begin to describe this moment," Seth Klarman noted in his second-quarter letter to the Baupost Group investors. Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More
“Expect the pound and UK financial assets to be increasingly volatile in the run-up to the general election, given the wide-ranging set of outcomes.
“The most detrimental of these outcomes for sterling, UK financial assets and the wider British economy, include another hung parliament or a victory for Jeremy Corbyn’s Labour party.”
He continues: “Boris Johnson’s intention to secure amajority within the House of Commons is by no means guaranteed.
“The Brexit Party will use the fact that Mr Johnson did not deliver Brexit by October 31 – something on which he staked his whole premiership.
“The Remain vote could also be split between Labour, the Liberal Democrats, the Greens and the Scottish National Party.
“Political fragmentation on this scale has never happened before in the UK.
“Therefore, a hung parliament looks like an alarming possibility, meaning there could be no majority to quickly and smoothly resolve the Brexit chaos.
“Should grinding deadlock continue, the UK economy would still haemorrhage investment and confidence. The fallout of Brexit has cost the UK three and a half years of lost opportunity and many, many tens of billions of pounds. This would only intensify with another hung parliament.”
He adds: “Meanwhile Jeremy Corbyn’s Labour party will campaign on the most radical, left-wing manifesto in more than a generation.
“Should he win this election, his anti free-market policies – such as the re-nationalisation of industries from utilities to railways to postal services, and the forcing of companies to give 10% of their shares to staff – plus his high-tax policies, including a possible wealth tax, will spook the financial markets, hit long-term sustainable growth of the British economy, put more pressure on UK financial assets, and lead to a significant sell-off of the pound.
Mr Green concludes: “The general election is set to be the most contentious and uncertain in generations. Investors now need to protect and build their wealth and assets by ensuring they are properly diversified across asset classes, sectors, currencies and regions.”