Theresa May resigns: what next for markets?

For investors with an eye on the longer term, the news brings little clarity.

Following Theresa May’s widely expected announcement that she would resign, the immediate reaction of currency markets appeared confused.

Having suffered declines over the past few days, the unsurprising announcement initially saw sterling rally against the euro and dollar. Those gains, however, soon waned, with sterling starting to trend down again at the time of writing at midday on 24 May.  

As Chris Tonwer, director at risk advisory JCRA, summarised it: “Although widely expected as she approached the podium, sterling still managed to trade frenetically for a short period of time, before dropping back to a more settled level. Sterling is acting like a rabbit caught in the headlights. Unable to jump up or down.”

However, whether the resignation has been greeted positively or not by markets, for investors with an eye on the slightly longer term, the news brings little clarity.

“The hope of a compromise and a Brexit deal that kept the UK close to the EU, even with perhaps a custom union to minimise trade disruption, seems to have now dissipated with the departure of Theresa May,” says notes Jake Robbins, fund manager, Premier Asset Management.

He points out that the only thing Parliament appears to agree on is not leaving on a no-deal basis. As a result, he says: “The UK seems to be doomed to remain in limbo for some time to come.”

According to Nigel Green, chief executive and founder of deVere Group, what happens next depends on who takes over from May.

He argues: “The fate of the value of the pound and UK financial assets will be shaped by Mrs May’s successor.”

If, as appears likely, that successor is an ardent Brexiteer pushing for a no-deal exit, sterling and UK shares will likely face further downward pressure.

In the face of such uncertainty, Green urges diversification. He says: “With the uncertainty intensifying due to ‘Trexit’, UK and international investors in UK assets should mitigate risks to their wealth by ensuring their portfolios are properly diversified geographically and by asset class and sector.

“Exposure to equities and bonds, from as many different issuers as possible will help safeguard their savings from this uncertainty and take advantage of the opportunities that will inevitably be presented.”

Adrian Lowcock, head of personal investing at Willis Owen, raised another risk for investors: “The possibility of a general election later in the year has risen and markets will need to consider the potential of a Corbyn-led government

“The uncertainty is set to continue for much of this year and during that time international investors are likely to sit on the sidelines and await some clarity.”

Subscribe to Money Observer Magazine

Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.

Subscribe now

Add new comment