Brexit: Great Britain Votes to Leave the EU

06.14.16 // Markets & Investing // Blog Article //

Brexit: Great Britain Votes to Leave the EU
June 24th, 2016

In a surprise move, Great Britain has voted to leave the European Union by a margin of 52%-48%, with Scotland and Northern Ireland voting strongly to remain and England and Wales going the other way. Below, we will outline a few key points relating to this historic decision by Great Britain.

What happened?

  • Despite late polling showing the “remain” camp would prevail, final numbers reflected a slim margin of victory for the “leave” camp, sending shockwaves through the financial markets.
  • The vote will kick off a long and drawn out two year process of negotiating Great Britain’s exit from the E.U., which will be a politically charged negotiation. The E.U. will likely play hard ball with Great Britain in an effort to deter further referendums from other member countries.
  • Although this vote is non-binding to the British government, it is expected that they will notify the E.U. under article 50 that they intend to exit.
  • Prime Minister David Cameron has stated his intent to resign, as he was staunch supporter of remaining in the E.U.

What to expect today:

  • Markets around the world will / are trading off sharply. The US opened down over 2% (S&P 500) while European and Asian markets are falling harder.
  • “Risk off assets”, such as US treasuries and gold are rallying.
  • We expect the reaction in markets today to remain dramatic as investors digest this unexpected news.

Longer term implications:

  • We expect Great Britain’s exit from the EU to be negative in the short and medium terms for their economy, and would not discount the possibility of it leading to a recession for Great Britain.
  • The Pound is falling sharply, as one would expect. In the short term this will help exporters.
  • The negative implications for the British economy will likely spill over to the rest of Europe as well, and to a lesser extent the US economy.
  • Central Banks around the world, including the Bank of England, have already voiced their willingness to inject additional liquidity into the financial system to support their economies and markets.

What do we do?

  • For today, we will not be making any changes to portfolios. The initial reaction this morning will be dramatic and we view it best to let markets have some time to digest the news and settle.
  • Over the weekend we will be reviewing our positioning in detail, particularly to international markets, to determine if any changes to our positioning are warranted.
  • As we have additional commentary and thoughts we will share them promptly.

If you would like to discuss further today, please do not hesitate to call.

Best,
Josh L. Galatzan, CIMA®
Meridian Wealth Advisors
Managing Director & Founder

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