Last week has been dominated by politics. While we should have more to say about the week’s events, a crushing defeat for the government on Brexit and scraping survival in a no confidence vote, hasn’t really changed anything. The markets have ignored all of it, suggesting that ministerial impotence and uncertainty are now priced in as the new normal.
With the UK now effectively having no functioning government, and with no hint of one in opposition either, we think the market might be on to something. After elections in Belgium in 2010 the Flemish and Walloons took 589 days before agreeing to a coalition and forming a government.
The Belgian stock market lost eight per cent over the period. At this point, dissolving parliament for 2 years and only losing eight per cent is at the optimistic end of the range of possible outcomes