Prince Harry’s betrothal has managed to remove a few Brexit headlines however it does seem impossible for each day to go by without more speculation on how negotiations are going. Confidence in an economy is born as much from sentiment as much as hard economic fact. Understanding that there is a lot of uncertainty around exactly what the outcome will be with negotiations, the reality is unless one is on the inside it is difficult to really know what progress is being made. Again, one must be aware of the possible implications of any agreement, good or bad, but those in responsibility also need to make sure they do not convey a message that encourages negative reactions from business leaders, large and small
We have mentioned in these blogs on previous occasions how we feel the Governor of the Bank of England appears to focus on the Brexit negatives and less on the strength of the UK. Many of the reasons for the City of London remaining the financial capital of the globe will remain post-Brexit. The OECD, a Paris based organisation, in a statement out today believe the prospect of Brexit will weigh on economic activity in the coming years. There are many uncertainties as to what might happen to the global economy in the coming years, Brexit is just one, but we must be careful that we don’t talk ourselves into an economic downturn in the meantime.
On a brighter note, the Bank of England released the results of the stress tests ion UK banks. Overall the Banking system was given a clean bill of health. The stress tests included a collapse in sterling, a jump in the unemployment rate, a disorderly Brexit, a spike in bond yields as well as a sharp fall in global GDP, along with a sharp fall in property prices. Should this unlikely combination happen, the banks may be ok, not sure about the population in general.
The news that Royal Dutch are planning to restart paying cash, as well as scrip dividends along with the reassuring review of the UK banking sector, helped the FTSE 100 bounce back from a few lacklustre days. The S&P 500 followed suit as investors continue to speculate on the agreement of tax reforms. Not even the news that North Korea had fired another missile Japans way could dent enthusiasm. Has the Santa rally started early? Time will tell.