Almanac Trader
"Leading up to Brexit markets were held back by concerns that Britain would leave the EU. Then a few days prior consensus was that the UK would stay in the EU and the markets rallied smartly. Then when everyone was wrong on Friday morning, markets around the world sold off sharply for two days. Then when Article 50 and the logistics of leaving made it apparent that nothing would happen soon, markets rallied back toward pre-Brexit levels.
There is some buyer’s remorse from those that voted for Britain to exit the EU. Political leaders in the EU have expressed anger and encouraged a swift exit. Yet citizens across the Union have also expressed interest in leaving. At the same time there is a political vacuum in Britain with no clear successor to the outgoing, resigning Prime Minister Cameron. Meanwhile, despite a sharp two-day selloff in global equities last Friday and Monday, the market now appears rather unfazed after being extremely nonplussed for two days.
Perhaps as is often the case, all the fear of the dire consequences of a British exit from the EU are quite overblown. Of course there are risks, but there are always risks. Remember this vote is non-binding it is just a recommendation by the voters to Parliament that 52% of them would like to leave the EU and 48% want to stay. It still remains to be seen if Brexit will actually happen and if it does how detrimental it will be to the UK, EU and global economies and markets. However, we believe it will proceed and the UK will leave the EU.
In the long run Brexit will likely be a blessing in disguise. It has the potential to strengthen both the UK and EU, by freeing up the UK, which is the 5[SUP]
th[/SUP] largest economy in the world and not in the Eurozone to set its own economic path, and catalyze the EU to hone its structure. In the near term, however, it is likely to add to market volatility and hamper economic growth as the powers that be figure out the next steps to Brexit and are pulled away from concentrating on implementing economic growth policies and initiatives."