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BREXIT - ‘Oooh, if you want to go there I wouldn’t start here.’

More than anything else stock markets dislike uncertainty.

European politics continues to be dominated by Brexit and uncertainty abounds.

In a 2016 referendum Britain decided to leave the EU (51.89%/48.11%). Deciding to get a divorce was the easy part.

The hard part has been agreeing to a price tag and a set of rules governing (mainly) trade processes going forward. Although much-diminished from its glory days, the UK remains the world’s 5th largest economy trading with one of the world’s largest economic blocs. It matters.

Newly minted PM Boris Johnson has said that Britain will leave the EU with or without a trade agreement come October 31st, a frightening prospect even by Halloween standards.

There would exist no basis for trade between the two camps. Employment, property values, share prices, all would feel the brunt of an exit without agreement. Each party would likely be tipped into recession or worse. They’re heading in that direction already.

Undoubtedly there will eventually be an agreement or the fallout from a lack of agreement will settle. Europe has a long and storied history of governing from crisis to crisis, so there’s an extent to which this is simply the way politics is practiced on the Continent. It’s business as usual.

Besides, the EU can’t spend all of its time worrying about Brexit when Italy appears to have elected an anti-EU government to further challenge the status quo.

Italexit would be even uglier than it sounds.

With attention spans becoming ever shorter it can be difficult to discern from the blizzard of incendiary headlines what is worthy of our attention & what’s just click bait. There has been a general coarsening of global political language accompanied by a shift to the right both in the US & Europe. Coinciding with Trump winning the White House.

The withdrawal of the US from the world stage under chief disrupter Donald Trump has emboldened those who would threaten liberal democracies around the world.

Boris Johnson has taken the extraordinary step of proroguing (discontinuing the current session) the British parliament in order that those opposed to his plan to ‘break & reset the leg’ will have scant opportunity to thwart his plans.

He has the vociferous support of Donald Trump who would appear to have little regard for historical precedent of not involving the US in the internal politics of allied countries.

We don’t know how the current impasse will resolve itself. It looks as though there may be a snap election in the UK which could leave Boris Johnson as Britain’s shortest serving PM ever.

The EU don’t want to give an inch to a nation that was at best a lukewarm participant in the European project (they kept Sterling). In fact they want other member nations to see what happens to a country that decides to leave.

Further complicating the issue is that the EU project was conceived of with only one door, an entrance. There is no exit mechanism. They have to build one. Doing so creates an existential hazard for the EU.

Brexit may provide a road map & the confidence for member states to follow should they desire. You can be certain there are other EU member states paying very close attention to how the UK nails the landing.

“If you don’t know where you are going, any road will get you there.”
– Lewis Carroll, Alice in Wonderland

Brendan O’Brien,
Proprietor, Hibernia Financial Group
Sr. Financial Advisor, Manulife Securities Incorporated

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