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Too Much Ado?

By Ari Charney on July 1, 2016

Even if you don’t follow international politics, you’ve probably had to endure more than your fair share of hot takes, hand-wringing and think pieces about what the U.K.’s exit from the European Union might portend for the global economy.

The June 24 referendum regarding the so-called Brexit, a term that’s just another pukey-cute portmanteau coughed up by our media, caused currency markets to go from complacency to panic in a little more than six hours. In that short span of time, the British pound hit a year-to-date high of $1.50 and then crashed to a 30-year low of $1.32.

2016-07-UF-In Brief-Graphic

As risk-averse investors, we tend to favor the status quo—or the devil we know. But we totally understand why British voters hate the idea of slowly ceding their national sovereignty to aloof technocrats in Brussels. We have a hard enough time accepting the rule of incompetent Washington bureaucrats, who are, after all, still our fellow countrymen.

Amid all the media-induced hysteria, however, it’s important to remember that the Brexit referendum is a non-binding vote that still requires action from Parliament. Equally important, it will take at least two years for the U.K. to withdraw from the E.U., and quite possibly longer if there are protracted negotiations.

Of course, the most attractive feature of the E.U. has always been the ability of its member nations to trade with each other in a single market. We suspect that negotiators will ultimately find a way to maintain mutually advantageous trade relations between the U.K. and E.U., even if political ties are severed.

 

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