What to expect from Brexit: the views of global financial analysts



    / photo Mick Baker CC

    Emotions after Brexit have not yet cooled down, and economists and analysts of all stripes have already written detailed comments on the implications of Britain’s exit from the EU for the global financial market and the global economy. In the forecasts, as usual, there are lots of variations. But, what most experts agree on is that the consequences will be steep and turning. Voting on the exit led financial analysts around the world to increasingly mention the word "danger".

    "Canary in a coal mine"


    For example, Paul Hodges, a columnist for The Financial Times, an analyst at the ICIS portal (an agency specializing in the energy, chemical and agricultural sectors), is confident that we will witness the end of the era of “school” politicians. Until recently, he writes, it was enough for European politicians to look photogenic and say something that coincides with the opinion of focus groups. Well, from time to time to attend summits and events of the G7 and G20. No one demanded of them a clean and uncluttered look at economic problems. The economy in most countries ruled central banks.

    None of the top politicians in Europe, first of all, David Cameron himself, did not believe that the problems of migration and the demographic deficit could be somehow connected with the deficit in the economy. From now on, the author of the material considers, the cult of central banks comes to an end. Demography, not monetarism, moves the economy. New politicians (for example, Teresa May, who is tipped to the prime ministers of Great Britain) will have to decide how to replace the integration economy that they have built with such diligence for 43 years.

    Brexit's own financial and economic implications in the United Kingdom are, by and large, a matter for Britain itself. Many banks and financial institutions are planning to move from island to continent. This has both its advantages and obvious disadvantages. But the bad news is not limited to the limits of the Kingdom. Panic moods began to spread throughout the European Union. They wanted their referendums in Italy, France and the Netherlands.

    No one believes anymore in the pledged assurances of the President of the European Central Bank, made in 2012, to preserve the euro by any available means. Hodges calls Brexit "a canary in a coal mine." Sometimes the miners take with them a bird that dies with a high concentration of harmful gases, thereby warning the workers. That is, the exit of Britain is a harbinger of the global economic crisis. Much worse than the 2008 crisis, given the debts that have accumulated the largest central banks in the world. Trillions of dollars were spent on fighting the effects of that crisis, but this policy did not work.

    Migration Finance and Financiers


    The author of the article in Business Insider, Mat Turner, is more concerned about the influence of the referendum on the financial and investment industries. In this regard, he believes, great changes are awaiting us. The decision to leave the EU will affect not only where the business is done from now on, but who makes it and how. It is obvious that international banks will want to curtail their activities in Britain. Even before the voting day, competitors, such as the Paris Financial Center, began to conduct an unobtrusive advertising campaign among bankers. So in the near future we can expect the migration of financiers.

    Cliche to argue that the market does not like uncertainty. But this is exactly what the UK signed for the next two years. S & P quickly downgraded the credit ratingcountries, stating that "Brexit will lead to less predictability and stability in the economic policies of the Kingdom."

    Entrepreneurial activity is also likely to decline. Mergers, acquisitions and exits of companies on the stock exchange will pause. Trading conditions are likely to remain volatile, which will lead to some incredibly busy days , but will also stretch periods when investors just wait.

    JPMorgan analyst Kian Abuhuseyn predicted earnings per share for European banks around 13%. Investment banks in Europe and before that lost some of their positions, changed managers, reduced staff. The winners were the American investment institutions, which rake up all the ballast, thrown off by European competitors.

    Era of the "Black Swans"


    Brexit was not a “black swan” (the result of the referendum was predictable, but it was still unexpected), although many publicists are trying to label it. But in a strategic sense, exit voting led to one important change in consciousness. Investors who specialized in the bond market used to take into account economic growth and inflation in their models. Now it turned out that political risks come out almost in the first place, writes Bloomberg .

    Investors and traders have never, in fact, assumed that what is happening in the political arena can be so important in determining the correct price of assets. Many predictive models will have to be revised. Just a fundamental analysis is no longer enough.

    Political risks in the euro zone today are the highest since 2006. Taking into account that in the next 18 months we will find out the results of the presidential race in the United States, several more key elections around the world will be held, the threat to global financial markets is only increasing.

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