Today might be a good day to step away from the keyboard (after reading this story), go enjoy the sun, and not look at your portfolio. Peeking again and again won’t do you a whole lot of good.
The Brexit “Leave” vote is a genuine surprise, and markets hate surprises. But as we’ve seen during Friday’s down-but-not-catastrophic market activity, it might not be quite as big a surprise as you think. Clearly, some professional investors had priced in the Brexit Leave vote already. And that’s important for you, non-professional investor. It’s too late to do whatever you might think to do in response to the result – say, sell stocks or buy gold. That trade has already happened. The damage is done. Your move is to just hold on to whatever plan you already had.
It feels like stocks are going to suffer a historic drop in value today. But remember, we can point to many down Dow days that had only-short term impact. Like Sept 29, 2008, when the Dow lost 778 points. Or Sept 17, 2001 – right after the 9-11 attacks — when the Dow lost 685 points. In both cases, and on the dozens of days when the Dow has lost 400-500-600 points or more, the market has always recovered. Sometimes, within a week or two. So, don’t overreact. (Here’s a great chart of the Dow’s 10 worst days, and what happened next.) In fact, if there’s something you’ve wanted to buy — a stock or mutual fund — today is probably a good day to buy it.
Soon, it might be a good time to buy British tea, too — if this big drop in the value of the British Pound holds, U.K. goods should become cheaper in the U.S., at least temporarily. But don’t cheer too loudly about that. It also means U.S. goods are about to become much more expensive across The Pond, a potential disaster for U.S. companies.
What other disasters might come from Brexit? Well, really, we don’t know..this move is unprecendented. My Scottish friends believe this almost certainly means Scotland will leave the U.K., as the Scottish want to stay with in the E.U. And then there’s the strange case of Northern Ireland, which also voted to stay in the E.U. Will the North start erecting more border controls with the Republic? Or will it find a way to join the Republic? The Brexit dominoes could fall for a long time. And that’s why markets are so spooked.
I have a lot more to say about the potential Brexit impact over at Grow. Have a read. While you are there, go ahead and check your portfolio if you must. But really, after that, go to the beach and let the dust settle.
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