A record breaking $2.1 trillion evaporated from the global markets on Friday June 24th – worse than the financial crisis that occurred on September 28th, 2008, after the collapse of Lehman Brothers.
This could have been avoided if the voters had chosen to remain into the EU. The Brexit aftermath has many voters calling this situation a Bregret – as they’ve realized the immediate impact on the British economy, from the devalued British pound to the crashing stock markets.
Brexit continues to have a snowball effect, with the world markets in the red. Britain’s decision to leave the EU created high uncertainty among investors, thus causing a turmoil in the global markets.
The uncertainty is mostly due to global economy growth – some investors are concerned that the growth rate is slowing down. Another major uncertainty is the terms of UK’s exit from the EU – how will this impact the trade between countries? And how would it impact the global economy?
Justin Trudeau claimed that Canada is ‘well positioned’ to handle the Brexit aftermath (CBC). Canada’s finance minister, Bill Morneau, claimed that the Canadian economy is in good shape, and the Canadian financial institutions are well funded. In fact, the Canadian banking system received international recognition during the 2008 Financial Crisis, since none of the banks required a bailout. Justin Trudeau mentioned that Canada will continue to be a strong partner of both, the UK and the EU.
On Monday June 27, 2016, all North American indexes lost more than 1% in value. The TSX was down 202 points (-1.45%). Mining stocks declined 3.45% (on average), making it the worst performing sector on the TSX. The best performing sector was Telecommunications – stocks in this sector gained 0.47% (on average).
Currently, the S&P TSX is trading at 13,689.70, which is 7.18% lower than the 52-week high (14,748), and 18.72% higher than the 52-week low (11,531.22). Despite the sell off, the TSX is up more than 5% YTD, rebounding from a sell off that occurred earlier the year, due to concerns over the Canadian economy & falling oil prices.
Dow Jones, NASDAQ, and S&P 500 lost 261, 114, and 37 points respectively.
Some critics say that investors are overacting to UK’s decision to leave the EU. The fact that global markets collapsed more than the 2008 Financial Crisis shows the magnitude of volatility the markets have been experiencing.
Currently, markets are facing conditions worse than the 2008 Financial Crisis (Fortune). This has completely shifted investor’s expectations for Fed Rate hikes. Because of the Brexit, the Fed is less likely to raise the interest rates, due to high uncertainty.
For value investors – the Brexit may create a perfect buying opportunity for the long term, since many stocks have fallen to multi-month lows.
The markets continue to be in turmoil, where investors are selling their stocks for cash, or to invest into other securities, such as bonds, and gold. Due to market sell off – Gold rose 19 basis points to 1,322.50.
Britain will have two years to negotiate its terms of exit for leaving the EU. The markets continue to be affected over the uncertainty of Britain’s future, the Brexit aftermath.
You may also be interested in: Bregret: Google Searches for “what is the EU” Surges
Writer: Jelani Smith
Disclaimer: All investing can potentially be risky. Investing or borrowing can lead into financial losses. All content on Bay Street Blog are solely for educational purposes. All other information are obtained from credible and authoritative references. Bay Street Blog is not responsible for any financial losses from the information provided. When investing or borrowing, always consult with an industry professional.