Brandywine Global react to UK Election result
Following last week’s General Election Jack McIntyre, Global Fixed Income Portfolio Manager at the Legg Mason affiliate Brandywine Global gives his thoughts on the Election result:
“We do think some of the prime minister’s hardline rhetoric may have simply been political posturing, so perhaps a hung parliament may be an opportunity for Prime Minister May to reevaluate her leadership style and approach to the Brexit negotiations, as an ugly, protracted divorce with the EU is not in either party’s best interests.
“However, markets are indeed averse to ambiguity, so we therefore anticipate a short-term selloff in the pound sterling, as well as falling Gilt yields. While our long-term thesis suggests that better economic growth will give the Bank of England (BoE) cover to tighten and eventually lift Gilt yields, we do expect the central bank to maintain its current degree of accommodation at the upcoming June 15 meeting, and generally in the near term.
“This election was more about the pound sterling than the euro, so we don’t expect the euro to move much against the U.S. dollar in response to these results. There have been other factors, such as stronger eurozone growth and the recent European Central Bank meeting that would affect the euro’s valuation.”