Headlines that Impact the Market
Weekly Commodity Report 6-24-16
The vote this past week to take Great Britain out of the European Union shocked world markets and has created havoc in nearly all markets. We believe the following points are important to consider when making market decisions in coming days and weeks:
*It is unlikely Britain’s departure from the European Union will evolve into a crisis similar to the collapse of Lehman Brothers in 2008. However, a long period of anxiety and confusion should be expected as the European Union represents the largest economy in the world.
*Britain is one of the largest financial centers in the world. Money can be expected to migrate toward more stable economies, such as the US. This should result in a stronger dollar for some time, making US exports less competitive in world markets.
*Britain’s surprising vote indicates the growing strength of populist sentiment in global democracies. The desire for national identity, fear of immigration and distrust of globalization are growing. Over the longer term, this should lead to trade agreement challenges and a slowing of global trade.
Although it will be two years before Britain is completely separated from the European Union, this watershed event should result in an immediate reduction in new investment and a slowdown of global growth.