The Brexit vote (Britain’s decision to leave the European Union) was unexpected by experts. Here are a few key points surrounding this historic event:
- Most politicians and businesses campaigned to keep Britain in the EU.
- Polls leading up to the vote, while close, predicted Britain would remain in the EU. Voters decided by a 52% to 48% margin to leave.
- The vote to leave the EU is non-binding on the UK government. Prime Minister David Cameron resigned and it is expected the next Prime Minister will honor the voters’ wishes.
- Britain must now invoke a clause in the EU treaty to begin the process of leaving.
- Since Britain is the first country to leave the EU, many procedures have not been tested.
- The process of leaving the EU is expected to take several years since various levels of negotiation will be required. Uncertainty will abound until negotiations are complete.
- Britain leaving the EU is another indication of voters who are unhappy with the status quo. Britain, like the US, is dealing with a number of economic issues. Other countries may consider a departure. This speculation can hinder economic investment and trade which in turn can create headwinds for global growth. How this unfolds is unknowable but we are positioned to weather it.
|Event||First Day Decline||Full Decline||Time to Recover Losses|
|Japan earthquake 3/11/11||-6%||-16%||4 months|
|US debt ceiling debacle 8/1/11||-3%||-14%||3 months|
|European debt crisis 3/27/12||-3%||-11%||3 months|
Source: Charles Schwab, Bloomberg data as of 6/23/16. Past performance is no guarantee of future results.