At times of high uncertainty, the dissemination of information can create more confusion than clarity. The downside of today’s media model has been on prominent display in the days since voters in the United Kingdom cast their Brexit vote, expressing a wish to depart the European Union. In the aftermath, analysts began to project a wide range of separations occurring within regions and countries. It was as if the map of Europe were heading back to its standing of 400 years ago.
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On a timely visit to London following the United Kingdom's vote to exit the European Union, the Pitcairn team had the opportunity to interview Wigmore Association partner, Marc Hendriks, Chief Investment Officer of Sandaire Investment Officer about what Brexit could mean to global investors. Marc provided thoughts on the following:
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The UK has voted to leave the European Union after 40 years of membership, defying the expectations of most market participants and ignoring the warnings from the International Monetary Fund and other leading economists regarding the negative impacts on trade. Market reaction was swift, with the pound falling to a 30-year lows and a “risk-off” trade rippling across the global markets. While the UK leave vote (“Brexit”) has generated volatility and a flight to safety trade in the short term, it has not altered our longer term outlook on global markets.
The Brexit vote—the United Kingdom voters’ decision to exit the European Union—has unleashed political, economic, and financial uncertainty that will play out over the months ahead for affected currencies, equity, and fixed income markets, sectors, and individual firms. Immediately after the vote, market values for banks, insurance companies, and asset managers dropped from 5 to 30 percent, with UK firms understandably hit the most and those less reliant on UK-based revenue sources impacted the least.
The United Kingdom’s (UK) voluntary exit from the European Union (EU) is unprecedented—and with it comes more questions than answers about how it will affect business entities in the UK and beyond. Economists anticipate at least several years of uncertainty, which typically does not bode well for financial markets. U.S. companies that sell to, buy from, or operate in the UK or EU, or are engaged in their financial or stock markets, are likely to experience some financial effects—but the nature and extent of those effects is still to be determined.
In a historic referendum, 51.9 percent of voters in the United Kingdom (UK) elected to leave the European Union (EU), catching global markets off guard. Reaction has been significant, with large currency moves, falling yields on perceived safe-haven government bonds, and large sell-offs in the equity markets. Within a day of the vote to leave the EU, the British pound sterling dropped over 6 percent, the 10-year Treasury yield fell to 1.56 percent, and global equities plunged 3 to 9 percent. The spillover effect to the U.S. economy will be minimal, but earnings of U.S.
Britons voted to exit the European Union on June 23, marking the first time any country has left since its formation. The political consequences for Britain’s Prime Minister were swift, and people around the globe reacted with shock and confusion. The economic and investment impact of this decision led to a rising U.S. dollar and falling GDP growth estimates, which will put downward pressure on S&P revenue growth in an environment where sales, margins and corporate profits are already challenged.
After the United Kingdom (UK) voted to leave the European Union (EU), the global markets shifted to a “risk-off,” with global stocks, the British pound, and the euro all declining while the U.S. dollar, gold, and high-quality U.S. bonds rallied.
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