With longs already getting nervous ahead of the exit polls, let's get started by digging deeper on the political side first...For all those tracking and trading the main event this evening we have only two realistic scenarios in play which makes capital flows easier to track:
=> A Tory majority which will deliver the Johnson/May deal with a hard brexit via Irish sea border and less activity with the EU (70% odds).
=>A Labour minority government with a helping hand from Lib Dems et al, here we can expect a second referendum in 2020 with a choice between a soft exit or remain (28% odds).
Any further gridlock in Parliament is currently sitting at <2% and does not remain in play. This would dramatically short-circuit GBP as markets will be caught out of position.
UK markets pricing a Conservative majority as a "positive resolution" to Brexit is complacent and allows us an opportunity to capture those out of position and mis-pricing UK market access beyond 2020. To date we have traded a tremendous amount of conjecture around the Brexit chapter, yet many are quickly to forget we are yet to trade the "fact" leg.
This next chart indicates the sense of division in Britain, a fragmented society which also highlights the stupidity to have such a referendum on a complex topic. The UK is not like Swiss for example having referendum after referendum, rather it is a representative democracy. Yet sadly we are seeing a corruption of democracy via media manipulation swerving public opinion.
For example, those who remember Cameron's premiership will remember the government was at the time asking for public to remain while they were pursuing policies of austerity (decreasing consumer confidence) and served to have more damage than good. The silent revolution or protest vote (all cleverly calculated) unlocked Pandoras box with a People vs Establishment narrative:
In any case, a ruthless Downing Street (with the help of Cambridge Analytica and co) have a free pass to do what they want and say what they want with scandal after scandal yet the masses remain on mute simply wanting to "get brexit done" ... bitterness in the public will last for a very long time and history will mark the collapse of the Crown, a fall that will stretch decades turning little England into a house of economic bondage.
A quick review of the UK Election Opinion Polls:
Survation: CON: 45% (+3) LAB: 31% (-2) LDEM: 11 (-) BREX: 4% (+1) GRN: 2% (-2), 05 - 07 Dec Chgs. w/ 30 Nov
BMG: CON: 41% (+2) LAB: 32% (-1) LDEM: 14% (+1) GRN: 4% (-1) BREX: 4% (-), 04 - 06 Dec Chgs. w/ 29 Nov
YouGov: CON: 43% (+1) LAB: 33% (-) LDEM: 13% (+1) BREX: 3% (1) GRN: 3% (-1), 05 - 06 Dec Chgs. w/ 03 Dec
Deltapoll: CON: 44% (-1) LAB: 33% (+1) LDEM: 11% (-4) BREX: 3% (-) Chgs. w/ 30 Nov
Panelbase (Scotland): SNP: 39% (-1) CON: 29% (+1) LAB: 21% (+1) LDEM: 10% (-1), 03 - 06 Dec Chgs. w/ 22 Nov
Exit polls will start at 10pm ( GMT ) via SKY/ITV/ BBC . Usually the exit poll is very accurate so it is highly likely we will be able to clear the knee jerk flows quickly unless there is a major surprise. We can draw a tree below to showcase the forward walk with Brexit:
- UK Elections (we are here) => Conservative majority => No transition extension (most likely scenario)
- UK Elections (we are here) => Hung parliament => Second referendum (least likely scenario)
On the macro side, I have widely covered segments on growth, and policies in the Telegram and in previous ideas in the archives (see attached). A major round of fiscal easing is coming, this will artificially keep growth supported in the short-term however the output gap will not close. will once again tick above target, however not via a robust consumer as many predict but rather via supply side constraints and uncertainty. The BOE will remain sidelined till 2H20 and provide a decent profit taking opportunity for our macro short positions.
For the technical flows we are tracking the infamous 1.35xx psychological resistance. This is a great level to track for macro positions in 2020 on the sell side. Here I am tracking for a leg from 1.35xx => 1.15xx via Tory majority and the Brexit fact impact leg. A quick recap of the same levels we traded here live on tradingview earlier in the year. We are sitting at the same levels as before which we were loading into and traded a +/- 2000 tick swing !!!
Here I am becoming increasingly on UK outlooks with either scenario. In my books Johnson will win by a country mile and we will immediately be able to trade the final flush in Pound (stage two of our rumour/fact impact legs). Populism is spelling danger across the global economy and shows no signs of abating.
...Best of luck to all those on the sell side and looking to increase exposure across portfolios. As usual thanks for keeping your support coming with likes and comments !!!
For the technical flows we are tracking the infamous 1.35xx psychological resistance. This is a great level to track for macro positions in 2020 on the sell side . Here I am tracking for a leg from 1.35xx => 1.15xx via Tory majority and the Brexit fact impact leg. A quick recap of the same levels we traded here live on tradingview earlier in the year. We are sitting at the same levels as before which we were loading into and traded a +/- 2000 tick swing !!!