Which Way Wednesday – Brexit Deal Fails, US Government Continues to Not Open

Brexit failed by a 2:1 margin yesterday.

With just 10 weeks (March 29th) to Brexit day, the UK faces a "hard brexit" where they quit the EU without any trade deals, which would throw all of Europe into total chaos.  British PM, Theresa May essentially demanded a "No Confidence" vote after the defeat and her challengers were happy to call for it so today her leadership will be put up for vote but I doubt she would have called for it if she wasn't sure she would be keeping her job – despite the widespread dissatisfaction with the Brexit negotiations.  

If, however, May has miscalculated and is removed from office, CHAOS is not a big enough word to describe the weeks ahead as the entire Government would have to be re-formed with new leadership – all the while as the clock ticks towards the hard date of March 29th.  As you can see, the Euro is tumbling and that's pushing the Dollar back to 96, which is putting pressure on US Equities and Commodities, which trade in Dollars.  

All this uncertainty is slowing the UK economy, which is getting dangerously close to a recession and this morning Goldman Sachs said that, while they do not see a US Recession in 2019, they do see a sharp slowdown with very low profit growth from 2018.  

A survey of 500 U.S. institutional investors by Natixis in December showed that the majority felt that the longest bull market in history will come to an end in 2019. Forty-one percent of those surveyed said they would be reducing allocations to U.S. equities.  The growth outlook for 2019 is also beset with trade concerns, a slowdown in China, Brexit and political uncertainty in Europe making forecasts for the global economy tricky.

The indexes made constructive moves yesterday, hopefully consolidating to get back above their 50-day moving averages but it's a tricky time as any negative move will be seen as a technical rejection of those averages – and that could trigger a whole new round of selling.  I'd say that could easily happen if May loses her vote this afternoon.