Is it Time to Bail on This United Kingdom ETF?

The deadline for a Brexit deal is fast approaching and British Parliament is no closer to securing an agreement. Conservative Prime Minister Theresa May managed to survive a no-confidence vote this week. This came after MPs voted by a significant majority on January 15 against May’s proposed deal with the European Union (E.U.).

The iShares MSCI United Kingdom ETF (NYSE:EWU) has managed to climb 4.5% in 2019 as of close on January 17. However, a failure to reach a deal on Brexit has the potential to plunge the United Kingdom into a political and economic crisis.

Deutsche Bank chief executive Christian Sewing recently warned that a “disorderly Brexit” would have “dramatic consequences” for the British economy. He went on to project a two-year recession for the United Kingdom if it is unable to secure a deal.

European Union negotiators elected to take a hardline against Britain after the landmark referendum. E.U. leaders undoubtedly worry that a soft position would embolden other anti-E.U. movements across the continent, which could further destabilize the union. What should investors be betting on as the world awaits clarity on Brexit?

There is mounting pressure within the Labour party to champion a “People’s Vote” – a second referendum on E.U. membership. Recent polls have shown a swing in favour of remaining, but opinion polls were notoriously unreliable in the lead up to the 2016 vote.

There is no telling where this saga leads after the recent deal fell through. For now, this U.K. ETF is too precarious of a hold as Britain’s future hangs in the balance.