2 July 2016:
Everybody seems to have an opinion what Brexit will mean. It seems there is a lot of variations that could play out, but it is hard to imagine that England and Wales will still be in the EU in 3 years time.
The financial markets have followed the script almost exactly so far.
- Because the result was unexpected a lot of people dumped shares on the basis that it is best to panic first.
- Then shares started to look cheap and the bargain hunters piled in and the prices rose again, almost back to what they were.
- Next week the bargain hunters will stay away and the late panicers will start selling and shares will gradually decline ( I would be selling now if I owned UK shares).
- The pound is staying lower because the market is assuming an interest rate drop in London.
I am not an investment analyst and I don’t take any responsibility for others decisions, but I have seen it before.
UPDATE 27 July:
It looks like I have misjudged the investment sentiment. Brexit will clearly be bad for British business and they are in for some bad economic times over the medium term. They will be exacerbated by continuing austerity measures. So long term the UK sharemarket will decline.
I think the drop in value of the pound has made UK shares look cheaper which might explain the continuing strength.
It is getting closer to the endgame, but it is still clear that they don’t have a clue. I have long assumed that they will leave without a deal, and it still seems most likely. Why can’t they have another referendum?
So now it is an election where the direction of all government for the next 5 years will be decided by Brexit. It just all seems so incomprehensible to me. I hope the 2 NZ referenda don’t cause so much long term damage.