In light of the recent news about the citizens of Great Britain voting to leave the European Union (popularly known as Brexit), many of us are wondering what the lasting effects will be. To cut through the media hype about financial implications, I wanted to share a couple of articles I’m reading as well as a couple thoughts:
- Here is a good overview of Brexit from the New York Times.
- This Economist Piece is helpful in understanding What Happens Next.
- Lastly, here is an article by the outspoken Barry Ritholz about Things to Know about the UK Vote.
No one is exactly sure how Britain’s exit from the EU will play out in the global economy over the next months and years. However, to put things in perspective, the UK accounts for only 3.9% of global output and their exit from the EU won’t happen all at once, but rather over the next couple years.
Markets tend to behave with volatility (both up and down) when they are surprised and/or when there is uncertainty about the future. Hence, today’s global market volatility was not particularly surprising. While Britain, Europe, and the rest of the world make sense of the shifting political and economic landscape, the prudent thing to do is to keep calm and carry on.