As U.K. ‘Brexits’ E.U., Confidence Leaves Stockholders

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When the people of the United Kingdom voted to leave the European Union yesterday, they did more than they most likely anticipated.  After news came early this morning of the referendum results, phones around the world rang off the hook, and when the markets opened, a critical blow to not only the U.K. economy, but the world economy took place.

Due to the vote, the British Pound dropped about 11% against the dollar, which may not seem so critical.  However, this is now the lowest the sterling has been in over 30 years, and it is all due to the so-called ‘Brexit’.

Despite the vote taking place in the U.K., American stocks have taken a major hit.  The Dow Jones, for example, dropped over six hundred points today, which is its second largest drop since the recession of 2008.

American banks, such as J.P. Morgan Chase, Citibank, and Bank of America are all in bad shape due to the financial instability of the world economy after the Brexit vote, but this is nothing compared to the banks of Europe.  Banks like Barclays, Royal Bank of Scotland, and Deutsche Bank are devastated by this move, as well as added fear and uncertainty of what is going to happen to the rest of the European Union.  This has led to the price of gold skyrocketing around the world due to so-called ‘fear trades’.

What is most shocking is the fact that very few people actually expected this vote to turn out the way it did.  Many experts in fact expected only a 20-25% probability of a Brexit taking place.

With word of other countries considering following the U.K. out of the E.U., there are many uncertainties in the world economy today, especially with this vote leading into a weekend.

However, as frightening as this is for the world economy, there is no reason to panic and invest your entire life’s savings in gold.  Many are already looking, and finding, great investment deals in banks and other companies due to price drops.  

Interestingly enough, there are rumors that Scotland may be looking to leave the United Kingdom in order to rejoin the E.U. as its own entity.  In 2014, Scotland held a referendum to vote on whether or not to gain independence from the rest of the U.K.  The vote turned in favor of staying, however only at 55.3%.  With the Brexit taking place, Scotland may hold another referendum, and the Scots may vote for their independence in order to remain in the European Union, but only time will tell.

 

 

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