Threat of Scottish Independence Adds to European Volatility

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The UK economy has bucked the Eurozone trend and has shown signs of strengthening, even prompting investor anticipation of a potential rate hike from the Bank of England. That’s the good news. The fly in the ointment though is the latest polls showing support appears to be growing for Scotland’s separation from England in the independence referendum scheduled on Sept. 18th. This is rattling investors and has sent the British pound tumbling to its lowest level in 10 months. Scottish independence could have dramatic economic implications especially in the financial sector because the two countries would have to decide how to divide national debt, taxes, mortgages and the entire banking infrastructure. Due to all of the uncertainty surrounding this issue, a yes vote will roil markets and we will see a rise in volatility at least in the short term. Expect to see Europe dominate the spotlight for the next couple weeks whether it is Ukraine, Scotland or the ECB. Remember, broad global diversification is the way to navigate these uncertain waters. Please see the latest Global Perspectives Monthly Commentary.

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