When we warned earlier this year to brace for significant market volatility throughout this election year, a “Brexit” is not what we had in mind.
For those of you hearing this term for the first time today, you may want to get used to hearing it. We are going to hear a lot about it in the weeks and months ahead.
What is “Brexit”?
In short, Britain + Exit = Brexit. Yesterday, the United Kingdom went to the polls for a referendum vote on whether to leave the European Union. In short, the leave vote won 52% to 48%.
Why does it matter to you?
First, in the immediate term (ie. today), this is a bit of a shock to the markets. Virtually all economists and politicians were in favor of staying, and the polls leading up to the vote indicated that was the likely result. In fact, global markets had risen significantly this week in anticipation of a vote in favor of the UK staying in.
Today, you woke up to the markets dropping in a pretty severe way. However, it is important to note that this is simply the market repricing what it was incorrectly predicting earlier in the week.
Your headlines are going to read that the European markets are plummeting, tumbling, being routed, and I have even seen the term “free-falling.” Indeed, they are.
However, what none of these headlines even bother mentioning is that the MSCI Europe stock index had risen 9.75% in the last 5 days leading up to today. Today, not surprisingly, the broad European market is down just over 9%, essentially just giving back what it had gained earlier in the week. Continue reading “The Votes are in – “Brexit” Wins”