Twin track UK equities: how markets priced stocks after Brexit

As we write, the Brexit trade deal is being rubber-stamped across Europe, and the FTSE 100 is up in post-Christmas trading. The UK remains by far the largest equity market in Europe investors even though FTSE 100 stocks have underperformed European equity markets by 40% the last five years.

If we examine the days after the Brexit vote, in local currencies the FTSE 100 did not sell-off more than the broader European equity markets. This is because this index has a higher percentage of  ex-UK revenue. Conversely, the overseas activities by UK companies in the FTSE 250 index were said to be imperiled by the prospect of the UK leaving the European Union. So FTSE 100 vs. FTSE 250 has been seen as a tool to express views on the Brexit negotiations and future outcomes.

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