Effects of Brexit difficult to quantify as COVID-19 muddying the waters – Pensions & Investments

The reality is that markets have "kind of dismissed it," said Andrew Jackson, head of fixed income at the international business of Federated Hermes Inc. in London, speaking on a virtual panel event on June 17. While Brexit is relevant, it may be "bad, may be good, but only marginally bad or good," he said. Corporations got ahead of the official exit, managed risks and communicated them well, Mr. Jackson added. Federated Hermes has $625 billion in assets under management.

But concerns do remain, including the impact of "rules of origin" the need to demonstrate that goods originated in the U.K. or EU before they can be distributed on supply chains and "the uncertainty over the treatment of parts of financial services. The risk is that a combination of the rules, frictions and ongoing uncertainty undermine business investment," Mr. Roe said.

Insight's Ms. LaRusse said there is some evidence of delays in terms of bringing goods into the U.K., which is affecting costs. She also cited the rules of origin protocol as a risk. "There is some evidence to suggest there are frictions in the system, which are leading to less trade, and potentially that hurts the U.K. economy," she said.

And Hermes' Mr. Jackson added that supply chains will continue to be disrupted. "But I think in some ways, the last year has been a good time to have Brexit occur there's been a global pandemic and some of those supply-chain effects have not been noticed," and markets have gathered "all the bad news together in one big chunk," he added.

And any further bad news that causes another drop in sterling would actually boost domestic stock prices because about 70% of FTSE 100-listed company revenues are earned overseas, RLAM's Mr. Greetham said.

Christian Kopf, Frankfurt-based head of fixed income and FX at Union Investment Institutional GmbH, thinks Brexit "is largely priced into financial markets by now. In fact, we believe that after lagging global equities for many years, U.K. equities now offer good potential, as valuations look attractive."

That is especially true for midcap stocks those listed on the FTSE 250 index "which tend to perform well in economic recoveries. But even large caps now look cheap by historical standards," he said in an email. Union has 386 billion ($467.4 billion) in assets under management.

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Effects of Brexit difficult to quantify as COVID-19 muddying the waters - Pensions & Investments