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  • Klaus Meitinger

UK election - positive signal for British equities

(Reading time: 2 - 3 minutes)

Dear Readers,

Boris Johnson's Conservative Party won the absolute majority in the British Parliament. This has made one of the core risks of recent months more predictable. The House of Commons will now quickly adopt the necessary laws for Britain's withdrawal from the EU on 31 January. What comes after 31 January 2020, however, is less clear. This is when tough and probably long trade agreements with the EU begin.

The Lerbach Round is therefore also split when it comes to the impact of the election on the way in which the future Brexit will be made. Half of the experts now expect a higher probability of a soft Brexit. After all, Boris Johnson could now easily get the withdrawal agreement negotiated with the EU through the House of Commons in January. The European Parliament would then have to give its assent. But this is probably only a pro forma matter.

However, 50 percent of the experts are more skeptical. They point out that the political decision-makers on the part of the European Union could be a little tougher again. For their concession in the past months was probably based on the hope that Great Britain would still decide to remain in the EU after all. And because Boris Johnson with his comfortable majority in the back can now appear even more self-confident, the risk of a hard Brexit even increases.

The professionals, on the other hand, agree when it comes to the short-term effects on the capital markets. The British Pound is now seen more positively against the Euro. And the rally on the UK stock market, which started after the election, should also continue. The experts point out that the long period of uncertainty has led to a 30-year low in British stock valuations compared to other markets. Since 2016, British equities have clearly fallen out of favour with international investors. That could now slowly change again.

The experts now consider the prospects in the automotive and banking sectors as well as for small and medium-sized enterprises with a domestic focus to be particularly positive. The losers are the healthcare sector and the pharmaceutical industry.

Klaus Meitinger

Note: Despite careful selection of sources, no liability can be accepted for the accuracy of the content. The information provided in private wealth is for information purposes only and does not constitute an invitation to buy or sell securities.

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