How markets reacted to Brexit results
On June 24, 2016, the UK voted to leave the European Union (IEV) (DBEU). After the announcement of the referendum results, the world markets (VXUS) (VTI) saw a huge sell-off. Investors became worried about global growth. The UK is now the first country to exit the EU in a historical move amid continued challenges in the global economy (VEU). The major European indexes fell 7%–10% on that day. The US market and Asian markets also experienced a massive sell-off. Bill Gross, a prominent fund manager, referred to Brexit as “a storming of the gates of finance by populists.”
John Schlifske’s stance towards Brexit
However, John Schlifske has a different take on Brexit. He said that investors shouldn’t be panicked about the Brexit decision. He thinks that the UK’s decision will have some impact on the global slowdown, but that it won’t have a major impact on the stock market in the long term. He said, “Long-term investors realize that the UK leaves the EU, but it didn’t leave the planet.” Many investors believe the UK separation from the EU is a political crisis, not a financial crisis.
All the global markets recovered impressively after their two-day falls as a result of the Brexit results. From June 27 to June 30, the SPDR S&P 500 ETF (SPY) recovered nearly 5%, the SPDR Euro STOXX 50 ETF (FEZ) regained 6.8%, and the iShares MSCI Emerging Markets (EEM) recovered 6.2%. The rally in global indexes is showing that investors’ Brexit fears are beginning to dissipate, and it supports John Schlifske’s take on Brexit.
In the next part of this series, we’ll analyze John Schlifske’s view on the US dollar index.