Markets Undaunted by Brexit
So much for the promised economic catastrophe that was to befall the UK in the aftermath of the June 23 vote to leave the European Union (EU).
The FTSE 100 Index has already shrugged off all its initial losses following four hectic trading days that followed. After trading closed on Wednesday, the stock exchange is actually 0.5 percent above where it was when the referendum result was announced.
The British pound has dropped against world currencies like the dollar or the euro. But so too have interest rates in the UK dropped significantly in a flight of safety — into British pound denominated assets. That, even as credit rating agencies like S&P and Fitch were downgrading UK bond paper.
Short-term, then, if confidence in the UK was dropping or there was risk for financial contagion, why are investors buying UK government bonds instead of selling them?
In Greece, when sovereign debt crisis struck, interest rates rose precipitously, as investors demanded a higher rate of return given the higher risk of a default.
That is not happening in Britain, thankfully. Who ever heard of interest rates dropping on an investment that is supposed to be getting riskier? Contrary to Remain claims that the UK would be relegated to second class in the global economy, interest rates show that despite the uncertainty, investors still believed the UK would pay its debts.
ADVERTISEMENT
In the face of Brexit, then, so far the UK has not taken much of a hit in stocks, lower borrowing costs and cheaper exports. Meaning, if this trend were to hold, it might be conducive to produce more goods in the UK made by British workers in the immediate future.
It might even fuel tourism from the U.S. and Europe because at the moment it is now cheaper to travel inside the UK.
But the discounts might not last too long, as investors realize that the fears to do with Brexit were overblown.
In short, there is no cataclysm. And there was never going to be one. The whole campaign of fear against Brexit was simply meant to intimidate the British electorate. It failed.
Don’t be surprised if things normalize financially in short order as reality sets in that this is no big deal. So what if the UK leaves the EU? Why should markets, which supposedly follow supply and demand, care which flags fly in London?
ADVERTISEMENT
This article is printed with the permission of the author(s). Opinions expressed herein are the sole responsibility of the article’s author(s), or of the person(s) or organization(s) quoted therein, and do not necessarily represent those of American Clarion or Dakota Voice LLC.
Comment Rules: Please confine comments to salient ones that add to the topic; Profanity is not allowed and will be deleted; Spam, copied statements and other material not comprised of the reader’s own opinion will be deleted.
Similar Posts:
- Emerging Market Bond Funds
- Brexit Reveals All is Not Well in Globalville
- CAPM: The First Factor of Investing
- Oil, Commodities, Stocks: When Markets Fall
- The Shiller Ten-Year P/E Ratio
Recent American Clarion Articles
From Brexit to Liberty and Hopefully So Much More
As Americans, we at one time determined to dissolve the political bands which had, quoting the Declaration of Independence, “joined us with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them.” The
How We Became a Pro-Choice Generation
While there is hope that more people are understanding that all human life deserves protection, there remain many who do not understand this. So how do you create a generation of people who do not realize that the most innocent of human life deserves to be protected by the
Defense, Taxpayers Take Back Seat to Transgender Agenda
Are we to assume that taxpayers would also be hook for their hormone therapy, sexual reassignments, psychological counseling, and whatever facilities changes would need to be made to accommodate the gender-confused on base? These are serious and complex issues that directly affect the national
Markets Undaunted by Brexit
So much for the promised economic catastrophe that was to befall the UK in the aftermath of the June 23 vote to leave the European Union
SOS: Speaking of Seniors – Why Isn’t Your Book in the Library?
In my first seven and a half years of doing that for the clients of the insurance agency where I work, I saved our senior citizen clients over one million dollars. I estimated that every year seniors throughout America pay over one billion dollars in Medicare related medical bills that they really
Supreme Court Ruling Highlights Huge Hypocrisy on Abortion
On Monday, the U.S. Supreme Court struck down two parts of a pro-life Texas law, HB 2, that protects women’s health and closed abortion clinics that can’t ensure adequate protection for women. Lefty reactions to the 5-to-3 ruling highlight the galactic hypocrisy of so-called “safe and
Why Are Taxpayers Paying for Union Activity?
If the National Rifle Association or the Sierra Club want to raise money to fund their operations that is their prerogative. It is not, however, the proper place of the federal government to be funding them, or unions, using your hard-earned tax
Recent Comments