It was about three weeks ago that markets were reeling following the U.K.’s Brexit vote. Since then, the U.K. got a new prime minister, the Bank of England hinted of more stimulus to come, and U.S. markets rallied to record highs as bond yields globally fell. ‘We think a lot of the warnings particularly from independent people, like the IMF, before Brexit were really painting too dark a scenario,’ said Neil Dwane, global strategist for Allianz Global Investors. ‘We do expect consumption to slow a little, probably investment to slow. But really the U.K. shouldn’t fall into a recession.’ Dwane said he agrees with the Bank of England’s decision Thursday to add more stimulus to the economy if needed. Kristina Hooper, U.S. investment strategist for Allianz, added that she sees the U.S. Federal Reserve on a parallel track with the Bank of England. ‘They are looking to see what happens, and they are very closely scrutinizing the interim periods between the Fed meetings.’ Low interest rates will continue to push investors into equities, according to the experts from Allianz. ‘Many international investors were concerned about David Cameron stepping down, they thought the U.K. wouldn’t have a government’ said Dwane. ‘The political risk has come off the table very quickly and you’ve therefore seen the U.K. market rally.’ U.S. markets have also rallied sharply. ‘There was an element of shock and awe about that Brexit vote because it had been expected to come out entirely differently,’ explained Hooper. ‘However, as investors became perhaps a little bit more thoughtful about what was happening, I think were was a recognition the Brexit vote was something that could be controlled. What adds to the equation is we’ve seen yields come down outside the U.S. and so that’s driven folks into the U.S.’ But Hooper expects the U.S. markets will still see more volatility in the months ahead. Dwane, meanwhile, thinks the U.K.market will remain mixed, with some companies benefiting from a weaker pound.
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