The British have once again stood their ground, and have voted for sovereignty control from what they feel is an oppressive European Union and for this I congratulate them. Perhaps, this is just the beginning, as Sweden ,Scotland , France and others have shown their willingness to do the same.
The British vote is essentially telling their “ EU partners” that they wish to continue trading with them, but want control of their borders and their destiny.
Did the pollsters ever get this one wrong. As the polls were closing, influential pollsters were giving the Stay a win over the Leave by a margin of 52-48%, when, in fact, the numbers were exactly the opposite in favour for the Leave side.
As expected, market reaction was swift with market indices down around the world. What is interesting is that the North American markets dropped on opening but, as I am writing this, have started to rebound. This tells me that the smart money is buying into quality blue chip stocks at a discount and should get back on track in a few days.
The downturn is good news for long term investors, as this is just another one of those times to increase wealth. As I have been saying for many years, a dividend portfolio is friendly in both down and up markets. In down markets, re-invested dividends buy more at less cost, and when markets re-coup, you have more shares thus more wealth and more dividends. It’s a wonderful thing!
Secondly, I believe that any further interest rate increases will be shelved for now, until economists determine where the dust settles.
This event, in my opinion provides more fodder for the Republicans with their “ Make America Great Again” versus the Democrats who represent the status –quo, of more of the same. This will be an interesting year end.
Professor and leading economist Jeremy Siegel stated in his weekly commentary dated June 24th, 2016 “ I think there's a lot of overreaction here and markets are very likely to reverse many of these moves but traders will remain cautious, especially ahead of the weekend.”
He also stated that “the Brexit vote is a revolt against centralization as much as globalization.” The key question as asked by Eric Reguly in today’s Globe and Mail to James Knightley, economist with ING “ will the UK’s divorce from the EU be a friendly one. which will limit the economic pain or will it break down in acrimony?”
Furthermore,Britain must remain in the EU for two more years as agreed to in the original pact when they joined the EU, so there’s still a lot of water to flow under the bridge.
Cheers or should I say Good-Bye?
24 June, 2016 Financial Planning Investment Services