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Screenshot of a breaking news alert e-mail from Q2 2017
It will be a long time before we better understand the implications of the #VoteLeave victory in last week’s UK Brexit referendum.
Indeed it will be a while – perhaps even months or years – before we really find out what the new relationship will be between the UK and the rest of Europe. And what else might change (breakup of the EUR currency?) in the wake of the Leave win.
However in the immediate aftermath of the Leave side victory there were some very clear losers, and some less obvious winners.
The (near term) Brexit losers were fairly easy to spot:
- about-to-be-former British Prime Minister David Cameron who led the Remain campaign, and who fell on his sword Friday morning by resigning;
- anyone with GPB denominated assets and income, namely wealthy Brits; and
- financial institutions, especially European banks, whose shares dropped more than most in Friday trading (e.g UBS -13%, Credit Suisse -16%, BNP Paribas -21%, SocGen –23%, Royal Bank of Scotland -27%, Barclays -20%, ING -19%, Lloyds -23%, Commerzbank -16%…).
The winners, however, were a little harder to discern.
So who seemed to gain from the surprise Leave victory?
Here is an initial list we compiled. Do you agree, or disagree? Someone or some group we left out? Let us know by adding your comments below.
1. Gold bugs. Gold is still the ‘Gold Standard’ when it comes to safe haven assets. And one of the first things traders did Friday when all heck broke loose was buy gold. For the day Friday, Gold ended up about 5% to $1,315 an ounce (and continued upwards early Monday to $1,325) as other commodities such as Crude Oil and Natural Gas were dumped alongside equities. CNBC reported that a number of noted hedge funds were long gold, including George Soros (who seems to always benefit from UK woes), his former protege Stan Druckenmiller, and UK based Odey Asset Management (known in the Forex world as a 25% owner of Plus500 Ltd (LON:PLUS)).
With a lot of both political and financial uncertainty to follow in the weeks and months to come, it looks like Gold believers will be one of the big winners from Brexit.
2. Boris Johnson. The Mayor of London until less than a year ago, Boris Johnson has been a Member of Parliament for just 13 months and although he was not a minister in departing PM David Cameron’s cabinet, he now stands as the odds-on favourite to replace Cameron as Prime Minister. In fact, UK bookmakers have Johnson as the odds-on favourite at 4:6 to be the choice of his ruling conservative party to win the PM race to replace Cameron, which should occur by the time of the party’s October caucus.
Johnson was both the emotional and vocal leader of the Vote Leave campaign, which was a big political risk for the new MP, and he now stands to reap the rewards of his political gambit.
And with the Conservatives having won last year’s election with a (slim) majority, holding 330 seats in the 650 seat House of Commons, Johnson (if he’s the chosen as successor to Cameron) might be Prime Minister for a while until calling the next election.
3. Online trading / Forex brokers. The Leave victory creates a lot of uncertainty in the financial markets, which looks like it will last a while. And that is likely, in our view, to result in increased trading volumes at Forex brokers for a prolonged period, as volatility is likely to rule the markets for a prolonged period.
Periods of heightened volatility leading to increased trading volumes are ideal conditions for Forex brokers to both increase Revenues from existing clients, and to attract new clients who want to get in on all the action. A good example was our report earlier this morning on FCA regulated FX and CFD broker Plus500, which saw record Spread revenues as well as record new client signups on Friday.
We also earlier reported on record trading volumes at some of the institutional eFX platforms on Friday. No reason to believe that it was any different at most of the Retail Forex brokers. And the good times in the form of growing trading volumes are likely to continue for the foreseeable future.
The shares of publicly traded online brokers were dragged down on Friday along with the rest of the equity market – IG Group Holdings plc (LON:IGG) -4%, CMC Markets Plc (LON:CMCX) -3%, London Capital Group Holdings plc (LON:LCG) -2%, Plus500 Ltd (LON:PLUS) -3%, Swissquote Group Holding SA (SWX:SQN) -4%, Interactive Brokers Group, Inc. (NASDAQ:IBKR) -6%.
However once the markets regain their sanity we believe that investors will come to realize that all this change and volatility will benefit those who are agents of change – the Forex brokers.
4. Donald Trump. The Donald was, somewhat ironically, in the UK the day the Brexit vote result was announced. If not for the total focus of the global media on Brexit fallout, Donald Trump’s appearance at the formal re-opening of his recently acquired Turnberry golf resort in western Scotland would have been lead-item news in the UK, the US and elsewhere.
While Trump might be a bit disappointed that he didn’t get the coverage he was hoping for to promote his new investment in Turnberry, he and his supporters were nevertheless very buoyed and encouraged by the result of the Brexit referendum.
The Leave win was very much a vote by the ‘common people’ against the ruling elites, as well as a vote in favour of the Us vs. Them mentality, of separatism and isolationism versus open globalization. As the non-establishment candidate, and one selling an anti-immigration, anti-the-world message as part of his Make America Great Again campaign, Trump is counting on U.S. voters to do exactly what UK voters were willing to do.