The 10 US Stocks Affected by Brexit

Goldman Sachs says 10 US stocks have much to depend on Britain leaving the EU after a deal is reached. In a research note, analysts at the investment bank said these 10 companies have the largest revenue exposure to the UK, generating more than 15% of their sales from there.

Die Aktien sind: Newmont Mining Corp. (NEM), Pembina Pipeline Corp. (PPL), Affiliated Managers Group Inc. (AMG), Willis Towers Watson PLC (WLTW), Invesco Ltd. (IVZ), News Corp. (NWSA) , LKQ Corp. (LKQ), Bank of New York Mellon Corp. (BK), MSCI Inc. (MSCI) und CBRE Group Inc. (CBRE)

Newmont Mining has been identified as the company most at risk, with three quarters of its sales coming from the British Isles.

Outperformance of some stocks

Last year, Goldman Sachs found that US stocks, with the highest share of UK sales, underperformed domestic stocks by more than 1,000 basis points (bps) between January and mid-December. Analysts expect the same companies will continue to be affected by the current uncertainty surrounding Britain’s plan to leave the European Union (EU) after Prime Minister Theresa May’s Brexit deal was rejected by the UK Parliament.

Since the Brexit vote was delayed on Dec. 10, Goldman said UK U.S. stocks have outperformed the rest of the SandP 500 index by 190 basis points. Analysts then projected potential for further upside if a clear path forward emerges.

The 50-50 chance of delay

According to Goldman economists, there is now a 50 percent chance that Brexit will be delayed and eventually concluded with closer ties to the EU. Such a scenario would benefit US stocks trading with their UK counterparts.

If there is a Brexit deal, the investment bank also expects the British pound (GBP) to appreciate against the US dollar (USD). Goldman forecast that successful negotiations, coupled with a slowdown in US growth and dovish Fed policy, will see sterling rise 9% against the US currency over the next 12 months. Analysts, again drawing on examples from last year, pointed out that a stronger sterling tends to result in UK equities outperforming.

Not without risks

Although Goldman is generally optimistic about the prospects for Brexit, Goldman warned that the UK’s deal to leave the EU remains highly uncertain and that setbacks could have a negative impact on the SandP 500 UK-exposed stocks.

For example, the banks’ economists said there was a 10% chance that the UK could leave the EU without a deal. Many believe that leaving the EU without a trade deal could plunge the UK economy into recession and seriously jeopardize global growth.

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