Good morning!

Well, what a shambles everything seems to be at the moment! Worse than that, Coldplay announced yesterday at Glastonbury that the country has collapsed. Perhaps a few more "Woah-oh-woahs!" are needed to straighten things out?

Markets hate uncertainty as we know, and it's difficult to think how there could be any more uncertainty right now. The market is doing what it is supposed to do - pricing in the risk of a downturn.

Results of an Institute of Directors survey, published this morning, reinforce my view that a downturn is now fairly likely. Not necessarily a deep recession, but some degree of economic downturn now looks inevitable in my view. Although prices in some sectors (e.g. housebuilders) are down so much, that any sign of things returning to normal could trigger an equally rapid rally, who knows?

Personally, I don't think the UK actually will leave the EU. The establishment are dead against it, and have indicated no intention to serve a S.50 notice until October, at the earliest. Even Brexit politicians seem to be rapidly back-tracking on things they said during the campaign. That gives time for the dust to settle, and a compromise deal to be thrashed out with the EU, on the quiet. Meanwhile, as the political & economic situation gets more chaotic over the summer, then I think some people might regret voting for Brexit - enough to tip the balance anyway.

This lays the ground for Cameron to triumphantly announce he has secured a decent compromise deal, and he can then hold a second referendum, which with younger people now galvanised into actually bothering to vote, would be won by Remain.

Pure speculation on my part, but that's how I see things panning out. If I'm right, then bombed out shares now could turn out to be bargains. If I'm wrong, and we do indeed have 4 years of chaos ahead of us, then many shares are probably still over-valued. Who knows? Each investor has to weigh up risk:reward, and make up your own mind.

In the long run though, things always get sorted out. Life carries on, and good businesses mop up market share from bad businesses, which fail in recessions. So if you take a long term view, then everything will be fine.

The other key thing is whether you think weaker sterling is likely to persist, or get weaker still? That affects the valuation of companies in various…

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