June 29 2016
SURPRISE! Britain is leaving the European Union (EU) after 40 years of membership.
Last Thursday, almost three-fourths of voters in Britain – about 30 million people, according to the BBC – cast ballots to determine whether the United Kingdom would remain in the EU. By a slim margin, the British people opted out.
Early Friday, Reuters reported on the immediate and potential repercussions of the decision:
“Britain has voted to leave the European Union, forcing the resignation of Prime Minister David Cameron and dealing the biggest blow since World War II to the European project of forging greater unity. Global financial markets plunged on Friday…The British pound fell as much as 10 percent against the dollar to levels last seen in 1985…The euro slid 3 percent…World stocks saw more than $2 trillion wiped off their value, with indices across Europe heading for their sharpest one-day drops ever…The United Kingdom itself could now break apart, with the leader of Scotland – where nearly two-thirds of voters wanted to stay in the EU – saying a new referendum on independence from the rest of Britain was ‘highly likely.’ “
U.S. stock markets dropped sharply, too. Barron’s reported markets’ response to the British exit (Brexit) didn’t indicate the bull market in America was over. Citing a report from Morgan Stanley, the publication noted American companies generate 70 percent of revenues domestically, which means U.S. stocks are less susceptible to the vagaries of international events than those of many other countries. That may make U.S. stock markets attractive to investors.
During the next few weeks, as the immediate and extreme response to the news settles and investors realize little will change immediately, the world should gain a better understanding of the ways in which Brexit will affect Britain and everyone else.
- Data as of 6/24/161-WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)-0.016-0.003-0.0340.090.0990.05
- Dow Jones Global ex-U.S.-1.6-4.9-16.7-0.3-1.7-0.2
- 10-year Treasury Note (Yield Only)1.6NA184.108.40.206.2
- Gold (per ounce)1.923.812.10.7-2.88.5
- Bloomberg Commodity Index-210.7-13.5-11.7-11-6.4
- DJ Equity All REIT Total Return Index08.916.613.412.47.3
*Indices are unmanaged and investors cannot invest directly in an index.
*Sources: Yahoo! Finance, Barron’s, djindexes.com, London Bullion Market Association.
*S&P 500, Gold, Dow Jones Global ex-Us, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend).
*The DJ Equity All REIT Total Return Index does include reinvested dividends.
*All investments involve risk – coins and bullion are no exception. The value of the bullion and coins is affected by many economic circumstances, including the current market price of bullion, the perceived scarcity of the coins and other factors. Therefore, because both bullion and coins can go down as well as up in value, investing in them may not be suitable for everyone. Since all investments, including bullion and coins, can decline in value, you should understand them well, and have adequate cash reserves and disposable income before considering a bullion or coin investment.