trading

post-brexit

While there were few surprises in the immediate market reaction to the referendum results last Friday, since then things haven’t quite panned out as one would expect.

Below we take a look at the 5 key trading areas post-Brexit, the fears that may come to define each sector, and what investors can perhaps expect in the second half of the year.

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trading post-brexit

indices

Having plunged all the way to the 5700s (around 100 points off its February lows) last Friday the FTSE 100, if not the wider, more UK based FTSE 250, has seen a remarkable recovery, at one point on Thursday hitting a 6400-grazing 2 month high.

The reasons for the rebound aren’t necessarily all that clear. The UK political class is in turmoil; the Conservatives have lost their heir apparent following Boris Johnson’s refusal to enter the leadership race (which is now led by Theresa May and Michael Gove) while Labour finds itself embroiled in a nascent civil war. And the actual form of the Brexit remains unclear, the markets and public none the wiser as to what a truly post-EU Britain will look like.

Yet the FTSE has continued to hold strong joined to a lesser extent by the DAX and Dow Jones, with many suggesting the index’s rebound is related to the fact that investors aren’t all that confident that the Brexit will be implemented at all. Of course we are barely a week on from the referendum, and there is still the potential for plenty of volatility to come; for now, however, the FTSE seems to have pulled off a Houdini-like escape.

trading post-brexit

currencies

The pound hasn’t been quite as lucky as its index peer. Diving to a 31 year low on Friday sterling hasn’t managed the same remarkable rise as the FTSE, though it has still lifted away from its post-Brexit nadir.

It is hard to see how and when (or indeed if) the pound will recover the majority of last Friday’s losses, especially with analysts now expecting a rate cut from the Bank of England before the year is out. Whereas the FTSE bounce straight back to the 6100 to 6300 trading bracket that has defined its 2016 sterling may well have found itself stuck in a new normal.

trading post-brexit

property sector

The initial losses seen in the property sector were truly staggering; the likes of Berkeley Group Holdings and Persimmon at points plunged as much as 40%, before settling at a reduced, if still worrying, 20%. Notably the sector failed to gain much ground back in the post-Brexit rebound, remaining just above the lows hit last Friday.

The likelihood of falling house prices, reduced investment hitting commercial property revenues, and a reluctance on behalf of buyers as their pockets are squeezed are a selection of the fears spooking the sector, which could see even greater losses if the Brexit causing the housing bubble to burst.

trading post-brexit

travel sector

Given that the sector was already struggling in light of the multitude of terror attacks in the past year and a half the Brexit result couldn’t not have come at a worse time for the UK travel stocks. With Thomas Cook, TUI and easyJet among the worst hit there are a few reasons prompting investors to flee from the sector.

Most immediately the pound’s weakness, coupled with the likely increase in inflation that brings about, makes it more expensive for customers to go on holiday, something that will obviously impact the sector’s revenue. Then there are the more hypothetical, long-term fears, including the potential for visas to visit continental Europe and the deterrent to holidaymakers this may cause.

trading post-brexit

banking sector

Easily the most terrified sector the UK banking stocks, epitomised by Barclays, Lloyds and RBS, haemorrhaged points between Friday and Monday, each member of that trio losing up to 35% in value. Like its travel and property peers the sector has been hit by a litany of post-Brexit fears, including interest rates remaining at their historic lows (or worse, even lower), the potential loss of the ‘passporting’ perks meaning banks have to relocate their headquarters to continental Europe and general liquidity worries (something that is an ongoing issue for the Bank of England to deal with).