First, #Brexit. Now... #Brecovery?
Following the UK's historic vote June 23 to leave the EU (see my " Brexit" blog) the values of companies on the London Stock Exchange crashed and the British Pound plummeted relative to other currencies. Markets in other countries dropped as well, as investors worldwide panicked. Trillions of dollars of wealth were erased in just one day. Fear and uncertainty drove millions of Britons to claim " Regrexit" over the vote and call for a re-do. They and probably billions in other countries accepted the financial meltdown as proof that #Brexit was a catastrophic mistake.
That's a nice, concise explanation I wrote above, isn't it? It reads like what history books might say 20 years from now. It's simple, neat, and... quite possibly wrong.
The thing about financial markets is that they're largely measures of sentiment, not objective value. The markets crashed because sentiment crashed. People panicked. There was an absurd overreaction. But this week cooler minds have prevailed. "Smart money" has bought up the bargains that self-flagellating panickers dropped on the floor. Markets this week have recovered. The Guardian reports that London's FTSE 100 recovered to pre-Brexit levels on Wednesday (29 June article) and rose further to a 10-month high today (1 July article).
All's not perfect in terms of recovery, though. While the UK's 100 biggest companies have seen their valuations return, the British Pound is still down about 8% versus the US Dollar and the Euro. That will make imports more expensive for Brits. On the other hand, Brits will see more demand for their exports. We'll see how the situation levels out in the coming weeks and months.
That's a nice, concise explanation I wrote above, isn't it? It reads like what history books might say 20 years from now. It's simple, neat, and... quite possibly wrong.
The thing about financial markets is that they're largely measures of sentiment, not objective value. The markets crashed because sentiment crashed. People panicked. There was an absurd overreaction. But this week cooler minds have prevailed. "Smart money" has bought up the bargains that self-flagellating panickers dropped on the floor. Markets this week have recovered. The Guardian reports that London's FTSE 100 recovered to pre-Brexit levels on Wednesday (29 June article) and rose further to a 10-month high today (1 July article).
All's not perfect in terms of recovery, though. While the UK's 100 biggest companies have seen their valuations return, the British Pound is still down about 8% versus the US Dollar and the Euro. That will make imports more expensive for Brits. On the other hand, Brits will see more demand for their exports. We'll see how the situation levels out in the coming weeks and months.