Brexit Facts: The good, The Bad and The Ugly

30 June 2016

 

This month the people of the UK voted to end forty-three years of European Union membership in what has been deemed a truly unprecedented move. This referendum has caused a standoff in European politics that is reminiscent of a ‘Sergio Leone– spaghetti –style - western’ situation.

Throughout the Brexit referendum debate we’ve seen multiple hero’s and villains coiled into huge plot twists: the shock to the markets of Britain’s vote to leave the European Union, and surprises cascading the woodwork from the moment the votes were counted: David Cameron’s resignation from his post of UK Prime Minister, and political discrepancies amongst UK politicians long after the results were in.

As the plot continues to thicken, let’s look back at the good, the bad and the ugly facts of the tale so far:

The Good

  • There are no signs of a financial crisis arising from Britain’s decision to leave the EU
  • Safe-haven bond and gold prices rose maintain protection in the markets
  • George Osborne’s rallying cry to calm a knee-jerk market reaction before the financial markets opened on Monday, bringing:

-Faith in The Bank of England’s contingency plans for Britain exiting the European Union

-Recognition of the UK’s openness to international business

-Awareness of the UK’s significantly low levels of UK unemployment

The Bad

  • $2 trillion USD was wiped off of the global financial markets
  • Sterling fell to a low around $1.3120, its lowest level since mid-1985
  • The euro remained weak, it fell to a three-month low around $1.0910
  • Asian stocks markets opened weaker following the Brexit news, with MSCI's Asia ex-Japan index extending losses for a third day, down 0.5 percent.
  • Japan's Nikkei was off 0.7 percent
  • The yield on British 10-year government bonds fell below 1.0 percent for the first time
  • S. stocks ended lower for a second day also, following European markets, pulled down by banking stocks amid uncertainty over London's future as the region's financial capital
  • The lack of direction in UK government right when the markets need reassurance of a stable path

The Ugly

  • Calamities between UK politicians including Sheriff of the ‘stay vote’: UK Prime Minister David Cameron, and sharpshooters of the ‘leave vote’: conservative and former London Mayor Boris Johnson, and leader of the UK Independence Party Nigel Farage
  • Further downgrades on Britain’s top-notch credit rating could follow
  • The possibility of a second Scottish referendum
  • Alongside a fresh Northern Ireland referendum
  • The next three months of political uncertainty in the conservative camp, which could cause economic volatility in the international financial markets
  • The rebellion in the opposition party against labor leader Jeremy Corbyn

Although there has been a short-term shock to the international markets, the UK public’s decision to leave the European Union serves as a reminder that financial markets can be subject to periods of event-related volatility and it is not a time to panic, but the perfect opportunity to reassess.

As every leading character in a Western knows, great opportunities can be found in moments of weakness. The markets currently present this opportunity and your wealth manager is here to help guide you through any transitions you may wish to make.

To find out where your investments stand, contact us now to arrange a meeting with one of our Wealth Managers.

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