The current response to Brexit from the EU leadership reminds me of the cycle of emotions that investors are said to go through when things turn against them. That cycle may provide a guide to coming events.

First there is denial, then anger and fear. The EU shows signs of being in these stages. One would hope to move on by next summer but I wonder if these stages may persist through most of 2017 due to rhetoric of politicians during the elections in France and Germany next year. 

Then there is desperation and panic. So the UK may have to handle these emotions from the EU in the future, probably after the continental elections as French and German politicians are unlikely to express such emotions when trying to get elected. 

Experienced investors will know this is followed by emotions such as despondency, capitulation and contempt for the market. The time-table suggested above would push this into 2018. If it coincides with a bear market too, with the EU / ECB having few viable policy options, then the mood in the EU will be bad!

It can be difficult to move beyond this and accept a new opportunity but that is the key transition required. We may be up against it time-wise after triggering Article 50 in the first quarter of 2017 if many months of possible negotiation are lost next year due to the French and German elections. 

So overall, I do not have high hopes for a negotiated settlement. I trust our government will realise it needs a strong and viable plan for this outcome. And if so, maybe they should just get on with it as soon as possible.

David Fuller's view

Thank you for this very astute observation. I agree with you and maintain that we should leave the EU following the declaration of Article 50, once we see that subterfuge is being used as delaying tactic.

While we are still in the EU, their leaders will be negotiating on the basis of what they have to lose. However, once the UK has left, EU leaders will be negotiating on the basis of what they may wish to regain – free trade and mutual cooperation with the UK, for instance.