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Will Brexit Cause Market Repercussions?

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Will Brexit Cause Market Repercussions?

The market analysts are reporting expected global implications of a ripple effect pending the D-Day of Britain’s leaving the European Union, more commonly called the Brexit.

The date of Thursday, June 23, 2016 is when the carefully run referendum will finally gauge the population’s attitude towards the country’s Eurocentric policies and laws.

Anticipation regarding the possible decline in Britain’s status on the financial player platform is driving an over cautious market outlook, even bordering on pessimism.

In grasping the significance of how close the referendum will be, the graph below reflects the photo finish of the huge “should I stay or should I go” mindset of the populace. 

The graph is from the website of The Economist.

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It is first important the realize how significant the rare event of Britain is offering its citizens this chance to mold the future policy of the country, in an attempt to give a brief breakdown of some of the issues that are driving the voting.

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It is the government handing its country folk the opportunity to be active in forming its future while neatly absolving itself from any of the blame and negative repercussions that may follow.

And some of those negative impacts may be:

  • The loss of influence on a global scale regarding the policy is making of that part of the world.
  • Uncertainty and unpredictable outcomes on the Financial and Economic fronts.
  • The world stage is judging Britain’s stance on immigration.

To address the first issue. 

Would the US favor Europe over Britain when it comes to trade deals and policies that could impact its financial markets? 

According to certain statements made by President Obama, this is a possibility.

But is it? 

The US has always found an ally in Britain and this fellowship existed before the advent of the European Union, and will continue if it leaves the EU.

The EU has some leading countries with massive GDPs, but the drawbacks are that it has some countries that are real financial drags too. 

Surely the US will prefer the stability of one country speaking with one united voice and one market.

With the possibility of the US maybe favoring dealing with the EU over Britain, could this lead to the markets reflecting this bias in the short and long term?

As one sees from the below graph, which is kindly reprinted here from www.whatukthinks.org, that the referendum results are too close to have an impact in the short term. 

Long term market forecasts will be linked to many other factors.

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Finally, to bring up the primary cause and problem of why the British public wants to leave the EU that has been prevalent in all the reports – immigration. 

This is not such an unusual concern that is shaping the politics in the western world.

There has been massive rioting across Europe for the past decades when the distaste and anger over immigrants and refugees being accorded an almost favored status in the countries belonging to the EU.

It has been seen as a welcome diversification in the past but in the more stringent economic climate and a weak economy, it is perceived as unfair and a drain on the population native to the country.

There are many parallels to this dilemma in the US. 

The ongoing debate about immigration reform is driving the political platform of the candidates in the forthcoming election.

This has resulted in surprising wins for the candidates who are not afraid to voice the feelings and thoughts of many people who have been too repressed and hesitant to speak out themselves.

There has always been a strong backlash to government immigration practices in the face of unemployment and economic downswing.

This is shown in the knee-jerk reactions to candidates and political parties who find it an easy wagon to hitch their band.

So the Brexit event is showing a few negative impacts along the way to giving its population a voice in the issue of whether to stay in the European Union or not. 

It is too close to call at the moment and to state the outcome with any certainty. 

Where there is any unpredictability regarding the markets, it will always promote a cautious approach.

The long-term forecasts will always take into account that Britain has always been a dominant force in the global markets no matter whether it has been a member of any exchange agreement or not.

Well over 330,000 net immigrants were counted last year in Britain. 

That is not counting the ones who live there illegally. 

Whether this will affect the markets globally is too close to say with any degree of certainty.

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