It’s been just over three years since the EU referendum but it’s still not clear what Britain’s exit from the EU will really look like - assuming, of course, that it happens at all.

This week, as we edge closer to the next notional departure date on October 31st, we might learn more about the details. And from that, it may just be possible to make a few predictions about how the stock market will react (although there are still plenty of unknowns).

Brexit has been an enigma for equity investors since the starting gun was fired in June 2016. Back then, the 52/48 victory for ‘leave’ wrongfooted the market and caused sterling to slump and index prices to tumble.

Stocks sensitive to the UK economy were hit very hard the day after the vote. Banks like Barclays and Lloyds saw their prices fall by around 20 percent. There were similar swings in cyclicals like the housebuilder Persimmon, recruitment group Hays and the car dealer Pendragon.

But the effects were short-lived and the FTSE All-Share, although volatile, has gone on to rise by 23 percent since then.

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Among the many questions now - with an exit possibly just days away - is how much of the impact of Brexit is priced-in to the market? And what kind of upside or downside could be on the cards in the weeks ahead?

Reality starts to bite

Trying to infer anything from the morass of political briefings, media reports and ‘expert’ commentary (let alone social media) is hard work when it comes to Brexit. But as the clock ticks down, there is evidence that the market is paying close attention to the mood music around the negotiations.

One important barometer here is the value of sterling, which has tended to be sensitive to which way the Brexit wind is blowing. The prospect of a deal between the UK and the EU, with the relative certainty that would bring to the domestic economy, has generally lifted the value of the pound. Indeed, with the possibility of a deal in sight, there’s been a relatively sharp rise in the value of sterling over the past week. That said, if a deal fails to materialise, it’s arguable that the pound will come under pressure. But what does all this mean for shares?

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