Brexit, E.U and the US.
Britain has two weeks. In time cracks may be papered over, cans kicked dowm roads and water may have flowed under bridges. But it is hard to see anything better than a long drawn out decline for Britain. Sterling will lose value. There will be a visceral change in leadership. it is posssible we will see a coalition.
Already the rest of Europe is at risk. The nations there, especially the new ones to the South and East are being tested. They have been living off the false air of bad debt and a lack of law. Their banks are ill capitalised, overextended and in some cases trading illegally. Most nations are reviewing down their economies. The value of real estate is falling. Poverty, unemployment, and the threat of immigrants is encouraging extremist politicians. Britain looks like an exhausted member deserting the sinking ship just when it should be helping. Leaderless, it is waging its own economic future to pander to an isolationist and luddite part of its audience.
But in the midst of this the US remains relatively robust. It is self sufficient. There is talk of a market correction, of declining profitbility, and the incoherent politics of the moment does little to help. But all in all it is in a powerful position.
So here’s what we see ahead. Expect Brexit to wrestle itself to a strangle hold within the next two months and before the Euro Elections in May. Expect a continued and bitter fragmentation of political thinking within each and every member state. Expect more populist and extremist posturing. Expect the E.C.B. to use every tool to keep the failing experiment alive. At the same time look for a steady collapse in Banks and National performance. Greece, Italy, Spain are at risk – so too is Deutsche Bank – and all, especially those countries to the South are threatened by the start of the new immigration season.
And so, at the same time, expect money to move from these beleagured nations to the only safe haven left, to the US. It is entireky feasible that we will see a stock market surge throughout 2019 – stay fully invested in US stocks.
The real challenge will come for us here later. Trade wars and bellicose foreign policy posturing wil only add to the threats to our major trading partners and then there will be a gradual knock on impact on our international companies here in the US. We too have debts amounting to more than 100% of gdp. we will find ourselves tetering on a damaging slippery s;ope. but that is for tomorrow.
In the meanwhile take action by focussing: on US home based stocks with low P/E’s and strong dividends and on the signs of the economic fire taking hold three thousand miles away.
Have a good day. James.