The Referendum – Market Impact

According to the bookmakers – whom as we know, are never far away from the result, it is likely to be a remain in the EU result. We just wanted to share with you the likely outcomes to the global financial markets whichever way the result does go.

Remain Vote

First, if the bookmakers are right and we vote to remain, then expect the markets to open on Friday and the screens will all be blue for positive. Possibly expect a 2-3% uplift on most of the UK and European markets, and this will be followed by New York later in the day. We do think however, this short term positive rise in markets will soon settle back possibly to where we are currently. In other words, it is only the removal of the Brexit uncertainty that will have affected the markets in this way.

Leave Vote

If there is a leave vote, then we are in unchartered waters. So on Friday morning expect complete carnage on the financial markets. The falls in the UK could be anything from 10% – 15%. So the FTSE 100 index could come back to 5300, and I would expect further falls around the world. In the short term Gilts will probably become a safe haven, as too would gold. Also sterling will certainly fall against most currencies, but certainly against the Euro, possibly by as much as 15% also. We don’t expect UK interest rates to rise at all, but inflation may increase as a result in lower sterling values, although this may not come into effect until next year.

What should you do?  

Nothing. Let us see where we are in the coming months and the fall out of everything. There will still be opportunities going forward. We are more confident of this than we have ever been before, and are willing to share with you on a personal level if you wish us to do so.

Many clients may remember the financial crisis of 2008. However, we recall the last quarter of 2008 vividly, because it seemed like the end of the world. The Dow Jones fell one day by over 770 points and this was on top of already very heavy losses. But, as we got into the Spring of 2009 the financial markets started to come back. It wasn’t the end after all, of course it wasn’t.

And if it is a leave result on Friday after the initial carnage, it will not be the end then either. Just sit tight, do nothing and wait for the markets to settle and recover.