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Martin Tillier

Martin Tillier

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Thoughts On Brexit: Don’t Panic and Look for Value

Okay, so the vote in the U.K. was a shock to many, not least the now “ex” British Prime Minister David Cameron. It was certainly a shock to the global financial markets, where a “remain” vote had been priced in. I have said many times here that when news is anticipated the positioning and attitude of the market has more influence on the reaction than the news itself. The big drops in the stock markets, and even in WTI, this morning seem to support that theory. With everybody long going in, bad news was bound to produce an oversized reaction. Whether that represents an opportunity or a warning, though, depends on how bad that news really is.

The economists seem united in their opinion that it is an economic disaster for the U.K., at least in the short term once the exit is completed. It should be born in mind though that it will probably take several years to negotiate the terms of that split. Who knows, by then there may have been another vote, this time to remain!

In all seriousness, though, the actual hard economic effect of a Brexit will not be as large as the early market reaction would suggest. Exports account for around 30 percent of U.S. GDP, and Europe, including the U.K. accounts for around 11 percent of that. Of course you have to factor in the cumulative effect of a slowdown in Europe on other economies and the negative impact on sentiment, but the actual drag on economic activity is not that large. In the light of that, a drop…




EXXON Mobil -0.35
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