1. The first distress will come from the depreciation of the pound - the pound has dropped from as high as $1.50 just before the vote to exit the European Union to as low as $1.1979.
2. The second market stress is higher inflation, caused by the depreciation of the pound -
Alberto Gallo noted that the U.K. imports around 50% of its food and 70% of its fruits and vegetables, adding that higher prices will force people to squeeze consumption.
3. The third stress will come from the U.K. government needing to increase spending in the wake of Brexit, which will likely increase the cost of funding.
4. The fourth market stress could come from a drop in property prices.
Algebris Gallo has estimated that the U.K. economy could contract by 7.5 percent of gross domestic product (GDP) over the next seven to eight years in the aftermath of Brexit.
Source:
http://www.cnbc.com/2017/03/27/brexit-will-bring-four-types-of-market-distress-portfolio-manager.html
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