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OPINION

Predictably unpredictable

Predictably unpredictable
July 25, 2019
Predictably unpredictable

We shall see. Having written about the stock market for more years than I care to admit, I’ve learned to be wary of predictions. More specifically, I’ve learned to pay very close attention to who’s making the predictions, and what’s influencing their views. As we explore this week, that’s particularly important when it comes to broker research which, as Daniel Liberto explores in his feature, is often fraught with conflicted interests and cognitive biases. The post-flotation woes of Aston Martin Lagonda are a case in point – those analysts connected to banks involved in the transaction have continued to publish bullish note after bullish note even as the automaker’s performance has worsened, culminating in yet another profit warning this week. 

Nevertheless, predictions that Mr Johnson will not have an easy ride are probably on the money, whatever the subjectivity of the commentators making them. Half the country do not share his vision of a clean break from the institutions of the European Union, and there is heavyweight opposition in parliament to achieving his promise of an exit by the scheduled 31 October, especially if that means doing so without a deal. And predictions of what a no-deal exit could mean for the economy continue to split opinion – or indeed what an early Boris exit may bring should he fail. 

Thus, uncertainty is undiminished – bad news for investors as the economic repercussions of the Brexit stalemate continue to filter through to the stock market. Indeed, while Aston Martin may have commendably refrained from blaming Brexit for its woes, others in the UK car industry have suggested political uncertainty has put many would-be buyers off. Others, including furnishing group Colefax this week, have expressed the view that Brexit has also contributed to recent housing market weakness.

Yet I would suggest that while Brexit hasn’t helped their markets, it has not been the only source of weakness. Car sales have been dented by environmental concerns and stretched consumers as much as anything else. And while supporters of Theresa May, including the outgoing chancellor Philip Hammond, will claim that she has left a strong economic legacy despite Brexit, in other respects they leave Mr Johnson many unresolved economic challenges beyond Brexit, not least how to fix the dysfunctional housing market we discuss in our cover feature. With many such circles to square, Boris’s unpredictability could even usher in the fresh thinking needed to do so.