Brexit is Official – What Happens Next?

Well, once again the unexpected happened. The majority of politicians, bankers, and economists had made their concerns known regarding the damage that could be done by a vote for the UK to leave the European Union (EU). UK citizens took little, if any, of such warnings to heart, voting to leave the EU and stand on their own economic legs. What drove the decision?

Heritage Foundation economist Steve Moore advised that the results were unexpected by most observers or politicians who had tried to make the point to the working class that such an exit would disrupt the economy even further. Moore put forth his expectation that part of the reason for the vote to exit the EU is the lack of confidence in the political machine and leadership, and citizens being tired of feeling that they are underwriting the economies of other EU countries through bailing out failing policies such as those that placed Greece in financial straits.

Market Trends After the Brexit Vote

Whatever is behind the decision made by UK voters, the impact to market trends has been immediate and extends far beyond the borders of the British Isles. US markets including the S&P 500 experienced the largest single-day drop in nearly a year. US companies further anticipate that over the next few months or even a year or two, trade with UK interests could be impacted as new agreements are negotiated. Eyes are focused on US Federal Reserve Chair Janet Yellen for her interpretation on the Brexit impact on US interests and how the Feds may react.

This presents a not-so-rosy picture for workers whose retirement plans are based on performance of a 401K or other investment portfolio largely dependent on stocks. Dropping stock values may significantly impact many of those nest eggs and even delay retirement dates.

Is There a Positive Side to Current Market Trends?

As is usually the case, there is a bright side to current economic trends.

Interest rates are expected to remain low to avoid further weakness to an already fragile economy. This could be an incentive for homebuyers and purchasers of other items that are typically financed for long periods of time, including new automobiles.

Tech stocks such as Facebook and Alphabet will likely remain somewhat untouched by the turbulence triggered by Brexit in large part due to their massive customer bases and increasing revenue stream from online advertisers. Another relatively new entry in the online relationship category is MeetMe (MEET) which is currently most saturated in the US, but is available in multiple languages making the ‘social discovery’ company poised for global reach. Not only is the company growing revenue and net income considerably, but its success may present a ripe target for acquisition by a prospective buyer that wants to enter the market segment. Traders may want to take special notice of this opportunity, as timing could be right for investing.

Communications companies that have a global reach and leading reputation for quality and reliable service should also fare well even in volatile periods. These would include such companies as Cisco and NetGear.

Another plus – with the increasing value of the US dollar vs. the British pound, a trip to the UK may now be an attractive consideration for travel plans in the near future. This could be beneficial to British economic conditions as well, as nearly 10% of visitors to the UK last year came from the US, with visitors spending more than those from any other nation.

What Does the UK Stock Market Outlook Mean for Day Traders?

Investors may be taking a short-term pause to evaluate the reaction of global and local market segments. It will take a period of months or even years for the full impact of new trade agreements and economic fallout to be felt, including any domino effect that could influence similar movement by other EU countries.

Investors are moving, at least temporarily, toward what are generally more safe havens in the markets such as government and municipal bonds and time-proven commodities such as gold and other precious metals. One of the most historically safe investments is that of US Treasuries, which will likely grow in demand. Traders may take a cautious eye in watching for stocks to bottom out and buy at rates that are extremely low compared to recent months. Selling as stocks drop only cements losses that may be reversed as markets turn around, although no one can predict with any certainty what the timing for such a recovery will be.

Whether your tendency is to wait and see what happens to market trends, or to jump in quickly and take advantage of stocks that have dropped to at least short-term low prices, information is your best tool in making investment decisions.

SureTrader gives clients up-to-date news and facilitates lightning-fast trades to optimize decisions and maximize gains. We have the trading platforms that include a web-based trading environment as well as desktop software with advanced features for the tools that meet every trading need. Android and iOS devices are fully supported for reliable accessibility to your accounts.

Our comprehensive unmatched customer support provides contact with real people to resolve trader problems quickly and efficiently.

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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

SAS View on UK Stock Market and Activity

Anyone reading a financial page or newspaper is aware of significant activity in UK markets brought about by many influences. This includes not only the impacts of the global economy but especially the state of European Union (EU) countries and consideration on behalf of the UK to break away from the EU – referred to now as Brexit. How is this impacting the British economy, and to what extent?

British citizenship and leaders are on the cusp of what many economists view as a vote that will be critical to the future of the UK’s financial position not only within the EU but also throughout global markets. During its time as part of the EU, Britain has flourished with trade agreements that have boosted economic growth from the slowest in the ‘group of seven’ economic powers (G7) to one of the strongest from the standpoint of growth in GDP. Those weighing in on the ‘leave’ side of the discussion point to economic policy reforms internal to the UK that boosted performance, rather than being part of the EU. Economists on the ‘stay’ side of the decision (who at this point in time represent the majority) feel departing will slow economic growth. Their estimates reveal that the EU has played a significant role in the economic growth of the UK – possibly as much as 10% – through opening up increased access to markets throughout Europe.

Taking all views based on economic history and educated opinions into account, the most widely-held belief is that exiting from the EU would create a negative impact on the UK by closing doors for trade in EU markets while opening few to make up the loss in other countries or markets.

How is the UK Stock Market Reacting?

Brexit is, of course, only one of the factors in day-to-day activity in the UK stock market. With a higher expectation that the UK will remain a part of the EU, UK markets remain on an uptick with the British FTSE 100 rising .4% with the vote looming, and the pan-European STOXX 600 index having realized the same level of gains for several consecutive days of upward trends.

Reuters reported that the UK’s blue chip index closed at 6,204 points early this week for a 3% gain, the best reported for a single day since February. This is believed to be in part due to a positive expectation that the UK will indeed remain in the EU.

Not everything is as rosy, with commodities such as industrial metals trending downward due to an excess in supply from global markets. Copper is an example with a drop of .5%. Energy stocks also declined driven by the global drop in oil prices.

Investors are exercising general caution in purchases pending the final outcome of the Brexit vote. There is also concern that should the UK go through with an exit move, other EU countries could be taking a look at their positions in the EU and consider a similar move, causing a domino effect within the EU as a whole. This could be much more disruptive to the state of the European economy than the UK on its own, possibly triggering global economic volatility.

Currency traders note that the British pound has trended downward in recent months – even over a period of years. Brexit is not expected to impact the pound’s performance significantly, regardless of the outcome of the vote. The pound fell against the US dollar in recent trading sessions due to concerns over the impact of the pending vote, although more recent beliefs that the UK will stay have not reversed that direction. The pound has in fact been the most impacted segment in anticipation of the Brexit vote results.

What Does the UK Stock Market Outlook Mean for Traders?

Even with the concerns and volatility that could be generated by the UK’s decision to remain in the EU, there are opportunities for traders. US stocks actually gained with the news from polls that indicate Britain will remain in the EU. Concerns had previously caused a nosedive in the US Dow industrials while positive expectations reinvigorated trading as the S&P 500 gained ground, spurred by shares in segments such as commodities.

Day traders can take advantage of volatility in UK stock markets regardless of whether the vote to leave the EU is stay or go. Jumping into the right trade at the right time can generate profits simply from the gyrations that can be expected by either decision.

SureTrader gives our clients up-to-date news feeds and services that enable lightning-fast trades to optimize trading activity and maximize gains. With trading platforms that include our free web-based trading environment and SureTrader’s desktop software with powerful advanced features, our clients have the tools that meet every trading need. Android and iOS devices are each supported for maximum accessibility to your accounts and investment choices.

Our award-winning customer support means efficient connection with real people to resolve trader problems quickly and efficiently.

Contact SureTrader right away to get started investing online with the best in online brokers.

 

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

Category: Market & Stocks

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