'Tis Only My Opinion!

July 2016 - Volume 36, Number 7

The Brexit Recovery

The Dissolution of the British Empire

For centuries, the British had a policy that allowed immigration from any of its colonies and/or protectorates. When Great Britain joined the European Union, the liberal immigration policies served to significantly change the ethnic and religious makeup of many areas of the country.

As a result, the nation's image as a Christian nation was changing and in many areas, thanks to the EU's policies, people were demanding and receiving Sharia law.

The Brexit vote

On June 23rd, 2016, Great Britain voted on whether to give up membership in the European union. Prior to the vote, the pollsters were predicting that the vote would be to remain in the EU.

Once again, the pollsters were wrong.

The immediate effect was a plunge in the value of the British pound as shown below:

The U.S. and foreign markets also reacted strongly to the vote.  The following charts show the immediate reaction in the NASDAQ, S&P 500 and the Financial Times Index.

On Friday, the NASDAQ lost 4.12%, the S&P lost 3.59% and the Financial Times Index lost 3.15%. The knee-jerk reaction to the results of the Brexit vote wiped billions of dollars off the market's value on a world-wide basis.

While there were many reasons given as to why it might be useful to exit, exit polls suggested that sovereignty and immigration were the primary drivers.

The After Effect

The immediate result caused losses to many portfolios which were holding long positions.

 But was anything really changed?

 In the U.S., the markets began to consolidate in the week following as shown in the following graphs. By Thurday's close, both the NASDAQ and the S&P 500 had recovered almost 80% of the knee-jerk losses.

The Financial Times Index, however, had risen above its close on Jun 22nd before the Brexit vote and closed at a new high for the year at 6504.33 as seen below.

The Lesson

Knee-jerk reactions are often wrong. 

But then - 'Tis Only My Opinion!

Fred Richards
July 1, 2016


Corruptisima republica plurimae leges. [The more corrupt a republic, the more laws.] -- Tacitus, Annals III 27

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