BREXIT’s impact on FTSE100. Over or NOT?
First the Scottish independence referendum… A year later the BREXIT… FTSE100 had been in a downward trend since May 2015. Markets simply don’t like the unknown…Obviously FED’s interest rate expectancy and China’s slowing economy had contributed to this pressure.
January 2016 was the worst opening month in the stock market history, pushing FTSE100 down to mid 5500s. Although the market rapidly recovered to 6300 – 6400 level (broke the negative trend by this move) this time BREXIT caused the sell off to 5900 – 6000 level.
Just over a month after BREXIT, FTSE100 is trading at 6900 level, only 2% away from the all time highs.
So is the negative atmosphere over now??
Our answer is; FAR FROM IT… Economy is slowing down in the UK, forcing BOE to drop the interests down to %0.25, lowest since January 2009. Moreover it is anticipated that the economic slow down will continue in the second half of the year. It may force the BOE to drop interest rates to near 0%. Also 2017 economic growth forecasts have already been revised to 0.8% from 2.3%.
After all we are expecting sharp drops on FTSE100. The market is already in over-bought position. Hence we are expecting a drop to 6400 level. Market may rest a bit at this point with minor jumps. We will review our analysis at this point but it wouldn’t be a surprise to see a further sell off to 6000 level…
This cannot be considered as an investment advice!!