The decision by the British electorate to reject the status quo and vote to leave the European Union will have far-reaching implications for political uncertainty, according to Lombard Odier Investment Managers.
The firm said the vote was part of a backlash against the established order since the 2008 global financial crisis. Jan Straatman, global chief investment officer, and Salman Ahmed, chief investment strategist, at Lombard Odier, commented: “We think this creates unlimited uncertainty across social, economic, financial and security dimensions and the months ahead will be critical to assessing the direction of this ‘brave new world’.” Straatman and Ahmed said that the leave vote would put pressure on sterling and added: “A UK recession is a near certainty and we expect inflation to rise sharply on the back of the weaker currency.” They said that continued weak global growth would continue and that the “Japanisation” of Europe was their base case, with disinflation and lower interest rates. Looking ahead, the duo said that opportunities will start to emerge, such as emerging markets. “Emerging markets will benefit strongly given attractive valuations and next to zero direct sensitivity to the UK vote. EMs will also benefit from additional liquidity provisions from key central banks,” Straatman and Ahmed said.