Brexit and Its Immediate ImpactsBy on 2016 Jun 24 Fri 11:31
So much buzz on Brexit yet majority of people are not even aware of what it is. Seriously, many people I talked to this week do not even know about it. Maybe it is due to lack of interest of current events (i.e. record low viewership on news programs). Maybe normal people are just not willing to learn more about the world as they find it too intimidating or too complex to understand.
We’ve seen the immediate impact of Brexit already – 5% limit down on Dow and S&P overnight with European stock markets all dropping more than that. Since then the damage is controlled as we see many European stock markets are recovering from the initial losses slowly all day. The truth, however, is not reflected because we have government intervention all day so far to contain this Brexit aftermath.
Can the governments around the world keep disrupting the financial markets like today?
No, because that will discourage investors from investing in these major financial markets.
And no again because the central banks are very poor these days. They do not have enough ammunitions to last more than 3 days of heavy selling if government bonds, stock markets and currencies all going south at the same time.
Hence the talking heads and so-called financial analysts will talk trash this weekend based on the outcome of today’s closing prices of the financial markets. Whatever they say means nothing as that is not real analysis of the impacts of Brexit. No one knows what the real impacts are as we cannot tell if Brexit is contagious or not.
One thing we can tell is that volatility induces more volatility most of the time. So volatility will likely stay high for at least several weeks. Volatility favours bearish actions in stock market, so stock market will have a tough time going higher these two months. Uncertainties is also something always affecting stock markets negatively. Until the roadmap of Brexit is hammered out clearly by the government officials, stock markets will have a hard time holding up.
My premium members already know what I think of Brexit from my newsletter earlier this month. Now that Brexit is in place, major moves in currencies and the stock markets will be unfolded in the expected direction. This will be a great time for traders.