Why you Need to be Aware of the Brexit Effect

In a national referendum, Britain has voted in favor of Brexit (Britain’s Exit from the European Union); an astounding decision, closely followed around the Globe, as repercussions from this decision will be far reaching.

What Americans can expect from Brexit

Reuters showed markets dropping from 2.88 to 3.71% at the time of this writing and falling as I write. Even one day ago, financial pundits were so sure Britain would vote to remain in the EU that US markets had begun climbing. Late in the evening, June 23, 2016 the votes tallies were showing a lead by Brexit and us stocks began to plummet from the surprise outcome.

Britain’s exit from the EU will strengthen the dollar, pushing US mortgage rates lower…This may create a refi bounce back as homeowners rush to lock in the new lower rates. The Pound sterling plummet over 10% against the dollar and euro. That will make US exports costlier, which can cause a slowdown in US manufacturing. Also, since Interest rates are falling, values of retirement investment portfolios are likely to reduce already low yields.

Exit agreements with other countries and the EU will need to be negotiated and that will slow the flow of investment into the UK, increasing capital outflow into the US. Trade uncertainty will reign in the immediate aftermath; but Chief investment officer of the Univest Wealth Management Division, Tom Cassidy believes the uncertainty will be more long-term than people realize.

On the other hand, there are some positive effects Americans can see from the Brexit:

  1. Ugly financial markets can create opportunities for savvy investors.
  2. European vacations may be cheaper with the Euro sliding against the dollar.
  3. Interest rates for mortgages will drop, making this a great time to refinance into nearly historic interest rates.

The Vote has created uncertainty, but the parliament must now vote, and an exit strategy will need to be planned. The process of withdrawing will take time, years in fact, and market uncertainty will take a while to settle. You can wait it out, or watch the market for your opportunity.


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