Brexit two months on: Markets recover but political uncertainty lingers

Sound building blocks for post-Brexit UK: Man GLG
Sound building blocks for post-Brexit UK: Man GLG

Markets may have calmed following the Brexit vote, but analysts are still contemplating the uncertainty surrounding the decision with the political sphere yet to find its complete footing.

Two months ago, British citizens headed to the polls to vote on whether they wanted to keep the country's membership of the European Union. A day later, financial markets went into meltdown when the country voted to leave.

On June 24, markets went into disarray, with the pan-European STOXX 600 index tumbling 7 percent on the day, and the U.K. pound falling to its lowest level against the dollar since 1985, hitting a trough of $1.3224. The day before, it had traded between $1.48 and $1.50.

"I think two months on — are we pinching ourselves? No," Henry Dixon, portfolio manager at Man GLG, told CNBC Tuesday.

"I think there was much better momentum going into the Brexit vote than we felt from an economic perspective. While I think it is very definitely, probably a political and constitutional vacuum, I think economically there's lots of sound building blocks that we could actually sort of point to."

"I think there's plenty that the government can do in order to continue that economic momentum," Dixon added, giving the Bank of England's recent stimulus as an example.

Protestors march from Park Lane to Parliament during the anti-Brexit rally in London, England on July 2, 2016.
Brexit one month on: The good, the bad and the ugly

While U.K. retail sales data have been one of the few closely-watched economic releases to deliver a positive outcome post-Brexit, the markets seem to have bounced back from their losses.

The U.K.'s FTSE 100 has recovered from its declines seen in late June and extended gains. According to Thomson Reuters data, from the FTSE's low of 5,806 points on the Friday morning following the Brexit vote, the index has since rallied some 18.38 percent. Meanwhile, the domestic-based FTSE 250 index has also recovered, up 18.1 percent since its lowest level on June 24.

Other European indexes and the STOXX 600 have also recovered since their lows, with the STOXX 600 up 8.7 percent since its lowest point on Friday, June 24.

Sterling however has not been as much of a successful comeback story. Fresh data as well the Bank of England's decision to cut interest rates and launch more bond buying has had negative impact on the currency. Yet it has had its moments, with the pound hitting a three-week high against the dollar early Tuesday, reaching $1.3203.

Assessing when to activate Article 50
Assessing when to activate Article 50

Despite the bounce back in markets, the U.K. still has a long way to go when it comes to politics. Uncertainty has played a big part in the post-Brexit world, with U.K. citizens wondering when the newly appointed prime minister, Theresa May will invoke Article 50.

Several comments have been made as to when the government should invoke Article 50, with a government lawyer stating in July that Theresa May .

On top of that, trade agreements and political negotiations with EU members and Scotland have yet to be fully finalized. The Scottish National Party is calling for the Conservatives to outline their 'Brexit vision', saying the party hasn't done enough to clarify its negotiating stance, since the vote to leave in June.

There have been some strides made in British politics however, with the new U.K. government being created in less than a month since the vote. This despite former leader David Cameron saying he'd expected a replacement by October.

While Brexit's uncertainty still remains a big factor in politics and for central banks, it seems investors are shaking off the vote's shock seen in June, and moving onto other market-moving topics like oil and when the Federal Reserve will choose to raise interest rates.