Will Bartleet, CIO and Portfolio Manager of Pacific Multi-Asset
Politics has not lost its power to bamboozle pollsters and surprise markets. What was meant to be an opportunity to secure a strong conservative majority, now looks like a seriously rash move. Theresa May’s conservative government has been forced to attempt to form a coalition with the Democratic Unionist Party to secure a parliamentary majority. If they fail to reach an agreement, there is every possibility that the UK voters will be back at the polling stations later in the summer.
Even if a coalition is formed, the two parties will have to agree on their approach to Brexit negotiations before formal talks begin on 19th June. The DUP have so far taken a softer position on Brexit than the Conservatives which suggests that an ultra-hard Brexit, “no deal is better than a poor deal” may be avoided.
This is another shock result for the UK but the global market impact is likely to be limited. The FTSE 100 is dominated by international companies and so remains broadly insulated from any impact this uncertainty may have on the UK consumer. We continue to believe that it is Sterling that will reflect the uncertainties surrounding the Brexit negotiations, which have only increased as a result of this election.
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