From Inner Circle (United States)-
The real loser after Brexit will be European stocks… as a third great inflation bubble pops (see this week’s Q&A)
It’s still hard to open a newspaper or switch on the TV without hearing about the repercussions of the surprise decision by British voters to leave the European Union (EU).
Last week, we were still in the thick of the post-Brexit market panic.
But with the initial shock now in the rearview mirror, this week, we have the opportunity to look at the longer-term effects of the Brexit vote – including an important warning for your portfolio about European stocks.
But first, a quick recap of the extraordinary week that was in British politics.
Backstabbing and Betrayal
Last Thursday, Boris Johnson, the former mayor of London and the most prominent Brexit campaigner, stunned the nation by dropping out of the race to be the next prime minister.
The populist and media-savvy Johnson (think Britain’s answer to Donald Trump) had been the bookmakers’ favorite to replace his fellow Eton and Oxford alum David Cameron, who resigned from the top job after he supported the losing side in the Brexit vote.
Johnson’s shock announcement came after his pal and fellow Brexit campaigner Michael Gove said he was throwing his hat into the ring.
Gove claimed he came to this decision not because of his ambition to become prime minister, but because he had “reluctantly” concluded that Johnson could not “provide the leadership” needed for the task ahead.
The blatant stab in the back prompted commentators in the British press to liken Gove to the toxic dwarf Tyrion Lannister from Game of Thrones. And not without reason: Gove is a self-proclaimed fan of the TV series… and says Lannister is his favorite character.
But the bloodletting wasn’t over…
On Monday, Nigel Farage – another main driving force behind Brexit – quit as leader of the United Kingdom Independence Party (UKIP)… leaving it also leaderless and rudderless.
In short, uncertainty abounds in the British political scene.
Markets, as the old saying goes, hate uncertainty. But despite all the high political drama last week… our top recommendation to play Brexit has panned out well…