HH How Investors Can Prepare For The Brexit Vote

Delivering on an earlier campaign promise to let the people decide the fate of Great Britain and the European Union (EU), current Prime Minister David Cameron will bring the referendum to a vote on June 23, 2016. The stakes are significant and could have both short and long term implications on worldwide stock markets as well as the economies of Great Britain and the Euro zone as a whole. Some have even suggested that investors are now more focused on the implications of the Brexit vote than they are of what the Federal Reserve does with interest rates this summer. Before we get into the potential implications to investors of a decision to leave the EU (a.k.a. a “Brexit”), or a decision to not leave the EU, we believe it would be beneficial to provide a historical context to the debate and highlight some key areas that could be impacted.

Great Britain has long been a member of EU, but notably absent from the Euro zone, the group of nations who elect to use the common euro currency, preferring, instead, to still use its native British pound (GBP). Nine other countries in the 28 member EU (i.e. Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Lithuania, Poland, Romania and Sweden) also do not use the euro as their currency. There have been many vocal opponents within Great Britain questioning the need to remain within the EU going forward, citing concerns over trade agreements, immigration policies and regulation costs. Overall, some believe that they are “not getting out as much as they are putting in” with respect to EU membership and that there could be better potential uses of this funding within their own borders and an improved economic outlook if they could have more control of their own destiny. Others in Great Britain believe that they should remain within the EU and are fearful of how a Brexit would impact their exports and standing within Europe and the rest of the world.

From an investment viewpoint, trade and economic growth are at the heart of the potential implications of this referendum vote in England. According to BBC.com, approximately 28% of what is produced in Great Britain is sold abroad. Interestingly, while about half of this overseas trade in the United Kingdom (UK) is conducted with the EU, England imports more overall than it exports to the EU. Hence EU country members need Great Britain as much (and perhaps more) as Great Britain needs the EU from a trading relations standpoint. Additionally, the cost of adhering to EU regulations are considerable for Great Britain, but were they to go it alone, there would still be some associated costs for them to access EU markets.

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Disclosure: The overview above is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any of the securities listed. ...

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Louis Jackson 5 years ago Member's comment

I'm of the opinion that events like this don't have any major influence on the market. Sure, it could lead to a brief short covering rally on Friday and into the next week, but ultimately I think things return to normal quickly after. Brexit is starting to remind me of something like Y2K where a lot of people freak out until they realize that the date/event is basically a non event. Brexit and a breakdown of the EU may eventually become an issue, but I think that will be years down the road.