Legends of the Industry

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Brexit – Unexpected Outcome



Britons’ decision to leave the European Economic Union ( EU) – by margin of 3 percent (52% to 48%) has created a great deal of uncertainty throughout financial markets.

The predictable knee-jerk reaction has been a so-called “flight to safety,” which means that government bonds, gold and the U.S. dollar are rising while riskier assets, particularly the British pound and global stocks, are being sold-off.

The British currency fell as much as 11 per cent to its lowest level against the U.S. dollar in , since 1985 (before the E.U. was created) when the news came out, and later recovering slightly.

UK’s decision to leave puts us in uncharted waters and, in fact, goes against the globalization trend which has prevailed – at least for developed countries over the last several decades (the European Economic Union, NAFTA, etc.). It also opens the door for other members to consider exiting the E.U.

Most people didn’t really know the ramifications of the result, once it was announced that the leave vote was slightly higher, internet search engines such as Google has seen jump on search such terms as in below as well as how to immigrate to Canada.



Relax - It’s not that bad!

While there is no obvious parallel to this pivotal political outcome, we think looking at the market reaction to disruptive historical events like this, all are similar. In fact the market collapse in September 11, 2001 and recovered within a month, also in the case of Fukushima nuclear disaster on March 11, 2011 – which also created significant supply chain problems around the world – the financial market recovered within 2 weeks.

The exit could cause the U.K. economy to slow down meaningfully (most estimates range from 2 to 4 per cent of GDP), as foreign companies hesitate to invest in the U.K.

Fur Industry News - Worldwide
by RB Media Group
Posted: June 24, 2016

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