What’s driven the Referendum Rebound?

We are now two months on from the UK’s historic decision to leave the European Union. Despite the passage of time, we remain in a post-referendum twilight zone; none the wiser about the how or even the when of Britain’s departure from the EU. Ordinarily this might have been taken as bad news for the UK economy and for investment markets. After all, we often hear that uncertainty is very damaging to both. However, in several regards the economy has fared better than expected, while equity markets have shrugged off the referendum result as if it had no significant implications for UK business.

In this note we briefly consider the progress towards Brexit to date, explanations for the perhaps surprising performance of the economy and equity markets since the vote and, more importantly, what we believe might happen next. Our conclusion is that, while we are both pleased and relieved to see markets performing strongly, after such gains, we find ourselves fairly cautious about the short term outlook.

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