Gah! Brexit! Run for the hills!
If you live in England, this might be kind of a big deal. I’m not 100% sure. However, if you live in America, it’s time to calm down.
How Does Brexit Affect America?
I’m on vacation, so I’m going to keep this brief, but I know a lot of people are worried about the vote on the Brexit, and what that might mean for the economy and the stock market, and so on.
Let’s start at the beginning. The markets hate instability. They hate not knowing what is going to happen. The POTENTIAL exit of England from the European Union is both unstable, and something that no one really knows what will happen. After all, Britain, if it actually goes through with it, will be the first country to ever leave the European Union, or EU. That is why you got a super plunge in the American stock market on Friday.
What happens next with the Brexit?
Well, no one is actually sure. That’s what unprecedented means. However, there are some things we do know.
England, while politically and strategically, very important to America, is actually very small from an economic point of view. We don’t import, nor export, much from/to England, and as far as finance goes, England isn’t exactly a huge player from an American point of view. In other words, if England were to sink into the sea tomorrow, while America (and myself personally) would be devastated from a humanitarian, political, and historical view, it wouldn’t really be much of a blip on the U.S. economy as a whole.
So, what exactly, is the problem?
The issue, is that this will have an unknown affect on the European Union. Maybe it makes it weaker. Maybe it stays mostly the same. Maybe, the whole thing cracks apart, and the EU as we know it ceases to exist.
Again, none of this is bad, per se, it’s just so much unknown instability and there is the entire issue.
Long term investors: Ignore.
Short term investors: More of that volatility you’ve come to know an love.
Maybe next week, I’ll do some follow up. For now, as is usually the case, don’t panic.