In the aftermath of the United Kingdom’s decision to leave the European Union, financial commentators have predicted all kinds of fallout, including Scotland’s secession, generational disputes and uprisings, a cross-border exodus of worker talent and companies, economic recession, deficits in government budget and pension fund payouts and a real estate crisis.
Although there are benefits to living in an integrated global economy, a downside is when one nation experiences a drop in the markets, the consequences could spread far beyond its borders.1
Some of the U.K.’s problems could impact investors, including those all the way across the globe in America. We are watching how this situation unfolds, and in the meantime, if you have any financial concerns, we are here to help you address them.
Fortunately, the financial news isn’t all negative. University of Pennsylvania finance professor Jeremy Siegel believes Brexit will create plenty of buying opportunities for American investors, projecting U.S. stocks could rise 10 to 12 percent by the end of 2016.2 Other analysts were surprised there was less of an immediate sell-off due to Brexit than expected, particularly in the credit markets.3
Still others postulate whether the exit will actually happen, given the multitude of complex issues, the widely anticipated negative impacts and the fact that many British citizens now say they doubt the U.K. will leave the EU despite the referendum vote.4
It’s difficult to imagine a scenario in which a citizen vote of that magnitude would not be implemented. With a parallel to many of the current political and economic debates going on in the United States, immigration policies and trade agreements hang in the balance. As time passes, these issues will slowly be addressed by new leadership, but the effects could be extensive and long lasting. Should the negative economic impacts wear on the British populace, they may find themselves regretting their perceived independence.5
Only time will tell, but as some social media commenters have observed: You Brexit, you buy it.
Nate Miller
785-760-1165
www.millerretirementgroup.com
1 Peter Vanham. Knowledge@Wharton. June 30, 2016. “The Case for ‘Regrexit’: Why Britain Won’t Really Leave the EU.” http://knowledge.wharton.upenn.edu/article/case-regrexit-britain-wont-really-leave-eu/. Accessed July 1, 2016.
2 Knowledge@Wharton. June 29, 2016. “Jeremy Siegel: The Impact of the Brexit Vote on Markets.” http://knowledge.wharton.upenn.edu/article/jeremy-siegel-the-impact-of-the-brexit-vote-on-markets/. Accessed July 1, 2016.
3 Katie Linsell. Bloomberg. July 1, 2016. “A Week Later, Credit Investors Are Shrugging Off Brexit Anxiety.” http://www.bloomberg.com/news/articles/2016-07-01/a-week-later-credit-investors-are-shrugging-off-brexit-anxiety. Accessed July 1, 2016.
4 BBC.com, July 1, 2016. “Brexit: ‘Most would not change’ vote on EU, poll suggests.” http://www.bbc.com/news/uk-politics-uk-leaves-the-eu-36689608. Accessed July 1, 2016.
5 Jacob Funk Kirkegaard. Peterson Institute for International Economics. June 27, 2016. “After Brexit: Chaos and Buyer’s Remorse?” https://piie.com/blogs/realtime-economic-issues-watch/after-brexit-chaos-and-buyers-remorse. Accessed July 1, 2016.
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