The Asset Allocator: Pound Headed Toward Parity With Dollar (Podcast)

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Includes: EWU, EWUS, FKU, FXB, HEWU, ZGBR
by: SA For FAs
Summary

The pound is currently trading at $1.27. That is worse than 2009 when the world economy was reeling and the UK government was bailing out banks.

Implicitly, then, the UK is in financial crisis, but realize that Brexit hasn’t occurred; it’s uncertainty over Brexit that is killing the economy.

Wouldn’t an actual Brexit, which now seems politically more likely, have an even more severe effect?

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The pound’s dismally low level suggests that the UK is in financial crisis. Realize though that Brexit hasn’t occurred; it’s uncertainty over Brexit that is killing the British economy.

This podcast (4:49) argues that Brexit is actually not inherently bad for the British economy; the big mistake was rather the failure to simultaneously create a low-tax, high-growth business haven along Europe’s border. Investors should expect a long-term devaluation of British assets.