Brexit: worst-case scenario hits bank and supermarket stocks

A "disorderly" no-deal Brexit would hit banks, autos, supermarkets and aerospace, say Morningstar equity analysts

Alex Morozov, CFA 11 December, 2018 | 6:00PM
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Betting on the outcomes of political debates isn't our forte, and the upcoming U.K. House of Commons vote that could determine the direction of the world's fifth largest economy for the foreseeable future is no exception.

As bottom-up, fundamental, long-term-focused analysts, however, we do want to ensure our industry analysis and models adequately account for the macroeconomic and political risks. In this research, we use a worst-case scenario of a disorderly no-deal Brexit to stress test models for our companies with the greatest exposure to the U.K. economy and Brexit.

While we identify a few firms that could face long-term adverse developments following a no-deal Brexit, namely in the automotive space, we also see most disruptions as short term in nature and thus unlikely to materially alter our long-term views. We believe we adequately account for the heightened risk via our uncertainty ratings and see several investment opportunities with the market getting jittery as we get closer to the Brexit Day.

  - source: Morningstar Analysts

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Airbus SE119.65 USD4.65
Associated British Foods PLC32.20 USD-0.31
Banco Santander SA ADR3.96 USD1.28Rating
Barclays PLC2.70 USD7.06
Bayerische Motoren Werke AG ADR34.26 USD0.57Rating
Danone SA71.81 USD0.81
HSBC Holdings PLC ADR31.81 USD0.66Rating
Leonardo SpA Az nom Post raggruppamento8.70 USD9.16
Lloyds Banking Group PLC0.64 USD1.73
Meggitt PLC6.85 USD12.30
Morrison (Wm) Supermarkets PLC2.50 USD7.76
NatWest Group PLC ADR5.42 USD-3.56Rating
Nestle SA ADR120.70 USD-0.24Rating
Nissan Motor Co Ltd5.35 USD3.88
Reckitt Benckiser Group PLC89.69 USD-0.41
Rolls-Royce Holdings PLC1.53 USD1.32
Safran SA147.31 USD-2.58
Sainsbury (J) PLC3.54 0.50
Tesco PLC3.26 USD2.42

About Author

Alex Morozov, CFA

Alex Morozov, CFA  Alex Morozov is the director of European equity research for Morningstar.

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