Fund Managers Selling UK Stocks Ahead of Possible ‘No Deal’ Brexit

• Fund Managers Selling UK Stocks Ahead of Possible ‘No Deal’ Brexit

Fund managers are selling their UK stock holdings at the fastest pace as fear of ‘no deal’ Brexit grows.

A monthly survey conducted by the Bank of America Merrill Lynch showed 10 percent drop in UK stock holdings by funds in August. The survey further showed fund managers are now holding 28 percent less than the market weighting.

Fund managers attributed the move to the possibility of the United Kingdom exiting the European Union without a deal after Liam Fox, international trade secretary, rated the chances as ’60-40′.

However, while managers were reducing their holdings of UK stocks, reports showed pessimism hasn’t reached the level attained in March when managers were a net 42 percent underweight.

On the other hand, fund managers were buying heavily into the US stock rally, pushing their allocation to 19 percent overweight, the highest since January 2015.

Fund managers are very bullish on US stocks. According to them,  the tax cut would boost corporate earnings and further aid productivity.

But some managers said trade war, rising borrowing cost and a possible economic slowdown in China may impact global outlook and hurt degree of growth in the world’s largest economy.

The UK services sector expanded at a three month low in July following the decision of the Bank of England to raise the interest rate to 0.75 percent amid sluggish wage growth. A decision most experts believe may hurt growth due to growing uncertainty and slowing global growth.

Again, despite the unemployment rate dropping to 40-year low, wage growth has remained below expectation. Further casting doubt on the sustainability of consumer spending going into Brexit final phase.