Now the UK has voted to leave the European Union after four decades of membership, the one thing most people can agree on is that there will be more volatility and more uncertainty.

David Cameron has provided some breathing space by passing the responsibility of triggering Article 50 of the Lisbon Treaty to his successor, and perhaps as a result sterling has not fallen quite as far as some had predicted, while the UK stockmarket managed to find a footing in the days following the vote.

Expert view

Giordano Lombardo, chief executive and group chief investment officer at Pioneer Investments, says: “The asset management industry will emerge from this decision without permanent major harm, though in the short and intermediate term there will inevitably be volatility and uncertainty. So-called ‘risk assets’ could see downside volatility for some time. Uncertainty on the future of Europe and the reaction from central banks will continue to dominate financial markets.”

From here on in investors are entering the unknown: some highlight the potential opportunities, while others point to the likelihood of a recession in the UK and the knock-on effects across Europe, although perhaps not globally.

Noland Carter, chief investment officer at Heartwood Investment Management, notes the likely implications of the vote include “economic growth [that] will be vulnerable in the near term for both the UK and the eurozone. As evidenced by Bank of England (BoE) governor Mark Carney’s speech, the UK government and BoE will be proactive to support growth. A meaningfully weaker sterling may help to counter some of these negative forces longer term. It should be remembered that eurozone growth has been stable, but it is low at 1.7 per cent year on year and there is very little room for error.”

Meanwhile, a Bank of America Merrill Lynch Global Research report in the wake of the result, ‘The Thundering Word: Brexit and the War on Inequality’, highlights that as an exogenous shock, Brexit “will lead to lower growth, lower rates and a stronger dollar. But it will also lead to a short-term tactical buying opportunity for risk assets, led by credit markets, once redemption fear passes and policymakers respond.”

Sterling has been hit the hardest following the vote, and the bad news has continued with the UK losing its prized AAA credit rating from S&P on June 27. The ratings agency downgraded the UK to AA on the basis that the Leave result “could lead to a deterioration of the UK’s economic performance, including its large financial services sector, which is a major contributor to employment and public receipts”.

Simon Down, senior portfolio manager at Nikko Asset Management, adds: “After the initial reaction, the critical issues for markets will now be the path that the UK chooses for exit and how the vote will affect the political backdrop in other European countries.”

Nyree Stewart is features editor at Investment Adviser