Blackrock has predicted “a long period of political, economic and market uncertainty” following the UK vote to exit the European Union.
The asset manager said in a statement: “We expect the UK divorce to be messy, drawn out and costly.”
It added that it anticipates losses in financial services exports and investment flows, as well as declines in global shares and risk assets. The statement also suggested that the value of commercial property values could fall by about 10 percent over the next year.
Blackrock noted that the decline of the pound sterling could benefit larger companies that have overseas earnings, while “domestic sectors such as homebuilders, retail and financials look vulnerable”.
It added however: “Indiscriminate selling could translate into opportunities”.
“US and Asia markets are only marginally affected by the UK’s exit from the EU, and are supported by a mix of easy monetary policy and economic growth,” the statement said.
Similarly responding to the out-vote, BNY Mellon warned of turmoil in the markets, but noted that it is less clear what the long-term effects could be.
Sinead Colton, head of investment strategy at investment managers and BNY Mellon subsidiary Mellon Capital, suggested that UK equity markets could suffer because of the assumed costs for UK businesses doing business with the EU.
She said: “Even though many of the companies listed on the FTSE 100 are multinationals, they typically have significant UK presences.”
Colten added that the volatility in the wake of Brexit, and general uncertainly surrounding global growth, could cause investors to become more risk averse, leading to a decline in risk-seeking assets and more demand for ‘safe haven’ assets.
A statement from BNY Mellon after the vote was announced also predicted a dip in UK equity markets, further weakening of the pound, negative impacts of the UK property markets, and the potential for eurozone countries to follow suit to exit.
The statement said: “The ambiguity during this negotiation period is likely to result in a slowing of UK growth, as businesses defer investment decisions until the future economic landscape is clearer.”
“Some international businesses with significant UK bases may activate plans to move at least part of their operations to other EU countries to ensure uninterrupted access to that market.”
Stephanie Flanders, chief market strategist for J.P. Morgan, downplayed the market volatility immediately after the vote was announced, saying that, as market players were anticipating a vote to remain, meaning the turnaround was more extreme.
She said: “Even though the moves were significant, we should keep them in perspective,” adding that actually, the movements have been “more orderly than we might have expected, given the extent of this shock.”
Flanders went on to say that the economic and financial effects of the change will be “serious but manageable”, but that there will be “continued political uncertainty”, which could have a significant impact on eurozone growth.
She added, however: “We don’t think this is something that puts the global recovery at risk.”
J.P. Morgan warned earlier in the month that, in the event of a Brexit, some of its 16,000 UK-based employees could be moved to Europe. However, in the wake of the result, chair and CEO of J.P. Morgan, Jamie Dimon, issued a note saying: “For the moment, we will continue to serve our clients as usual, and our operating model in the UK remains the same.”
Dimon added, however: “In the months ahead … we may need to make changes to our European legal entity structure and the location of some roles.”
“While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world.”
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