Sunak’s relief rally will not last long

Oksana Patron

26 October 2022

The current relief rally of the markets, which followed the appointment of Rishi Sunak as the UK’ Prime Minister after Liz Truss resigned after just 45 days, will not last long due to economic problems the country is currently facing, according to deVere Group.

The group’s chief executive, Nigel Green pointed to “the brewing deep and painful” recession, soaring energy prices, inflation running at more than 10%, labor gaps, ongoing supply chain dramas and the intent of the Bank of England to hike interest rates as some of the most significant current economic challenges.

“In addition, the massive loss of credibility suffered by the UK cannot be regained all that rapidly. U-turns and abandoning landmark economic policy after economic policy does not inspire investor confidence and trust. UK financial assets currently remain hugely unattractive for investors,” Green said.

Describing the UK as “ungovernable” with the economy that “resembles that of an emerging market, not a G7 nation”, Nigel said that the new PM would initially be given the benefit of the doubt from the markets, but the question was for how long.

On top of this, many in the Sunak’s own party and in the country blamed him for Boris Johnson’s departure which led to Truss’s premiership which would make it even harder for him to find unity and push ahead with the fiscally cautious agenda.

“Sunak is seen as having a safer pair of hands than his predecessor, with his constant warnings about the disastrous consequences of Liz Truss’s economic policies being proven correct. However, we expect the current relief rally of the markets will be over sooner rather than later because the UK still faces a storm of economic problems,” deVere CEO stressed.

DeVere Group is an independent financial advisory organisation with more than $12 billion under advisement.