With Boris Johnson now installed as the new Prime Minister in the UK, Julian Broom, our Chief Investment Officer, explores what may come next for markets.
We had worried about which Boris Johnson would turn up as Prime Minister – on first blush he may end up being much more positive for markets than had previously been thought. He has been ruthless in building his cabinet. Only pro-Brexit members of parliament made it through- there was no room for compromise. His first policy move appears to be shaping a significant fiscal boost to offset any impact from leaving the EU with a no deal.
A UK government party advocating lower taxes, lighter regulation and an end to austerity could be substantial positive for sterling which has weakened by over 6% since February and almost 17% since its pre-referendum level. Yet a change in tone, mood and momentum can only take the sterling bulls so far. What sterling backers would want to see is a real chance that this government and its policies will endure. In normal times, one would have to be sceptical. Since 1987, right-wing manifestos have not met with success when presented to the British electorate. However, these are not normal times. Populism is on the march as Brexit up-ends party affiliations and in Boris Johnson, the Tories have a master of empathy-politics and the agreeable slogan.
Source – Purple Asset Management