Brexit

The next crash or a damp squib?

 

Japanese TV seems to be loving the Brexit situation. I’ve been watching long, detailed analyses for the last few days.

This is an important event for me, as a British citizen with deep connections to Europe. I had even hoped to live and possibly work there in the future. For personal reasons as well as all the economic and political ones, I would prefer that the UK stay in Europe.

However, there is a chance it won’t, and it’s worth looking at what that might mean.

First of all, I think it is fairly unlikely that the UK population will vote Leave on Thursday. Much like we saw in Scotland a couple of years ago, what is essentially a protest vote fueled by anger is likely to wilt when facing economic uncertainty.

To some extent, the consequences of a UK exit are already priced into the markets. The pound is weak, the yen is stronger, the UK and global stock markets are down. If the Remain campaign wins we can guess that these will reverse.

And if the UK votes to leave?

I imagine there will be an overreaction on Friday, which will spill over into other markets. Might make for some buying opportunities if you have spare cash lying around.

What I would not do is make any hasty decisions. Hopefully you have invested according to a long-term plan, and a temporary event this month should not change that.

Unless you are going shopping, ignore the news and don’t look at your portfolio until September.

Fingers crossed!

5 Responses

  1. Strongly agree on ignoring the news and portfolio.
    Time and again, the markets behave very irrationally no matter the type of news. Case in point: the price of oil in recent months. One day the price rose because of oversupply concerns, a few days later it dropped also because of oversupply concerns.
    Since there is no rhyme, reason nor logic that can be consistently applied to short term market movements, we as individual investors should just focus on the very long term – that is where the prize is.
    Personally, regardless of whether UK stays or leaves, the market index will definitely be a lot higher decades down the road =)

  2. The best analysis of the Brexit was on HBO’s Last Week Tonight with John Oliver. Showing this episode is banned in Britain until after the vote!

    Cheers,
    Steve

  3. I liked the John Oliver piece (as usual) and largely agree. It’s a movement of emotion over rationality and sadly is looking likely now. I have money sitting around waiting to invest, so hope to capitalize on the stock sale in the short term chaos. Stocks will no doubt continue to rise over the long term.

    1. Hi Sendug
      Completely agree regarding investing. Will probably do some light shopping next week. Definitely won’t be selling anything or moving things based on this.
      On a personal level, I am really upset. I really believe in the whole European project and feel the UK just shot itself in the head out of sheer bloody-mindedness. Still can’t quite believe it.