There I sat, sipping my morning coffee and recovering from a lightweight hangover, which stemmed from a middleweight night of sampling wines in Northern California’s Wine Country. When I heard the words “Britain votes to leave,” I uttered the deeply contemplative phrase from Bill & Ted’s Excellent Adventure: “Whoa.”
Britain voted to leave the European Union (EU) by the slimmest of margins (51.9% to 48.1%). I was surprised. So was Wall Street considering they promptly wet the bed across just about every market segment. The Dow Jones went down 600 points in a day – the worst one-day financial loss since 2011. As I sit here writing (June 28th), it already rebounded by 269 points in a day. It’s safe to say that volatility is well and good. Don’t call it a comeback; it’s been here for years. Am I allowed to quote LL Cool J and Bill & Ted in one blog post?
This is a complicated issue that I don’t pretend to be an expert on. Like many others, I was aware that there was a vote but it wasn’t deep in my consciousness. I thought there was no way they would actually leave. Hence, my epic thoughtful reaction of “Whoa.”
Since the announcement, I have done a fair bit of research and these are my interpretations of my findings. I might be off on some things, failing to properly express the political and economic nuances of the Brexit. But since the topic is very much in the world news, here is one guy’s opinion on the who, what and why from a dude (more Bill & Ted, sorry) who isn’t an economist.
One group wanted to leave the European Union and one group wanted to stay. In what most experts would consider a dramatic oversimplification (but hey, this is a blog post and not a 600 page book), they broke into “stay” and “leave” for two reasons.
Stay: The economy. I haven’t found much data that backs the notion that leaving the EU would be good for the economy in the short term. Britain was limping out of their own recession and many consider rocking the boat a big mistake, bound to create more complexity for their already shambling economy.
Leave: Part economy and part immigration, but really whole parts independence.
On the money front: They were annoyed with being one of the functioning economies in the EU that was carrying the load for the failing ones (Greece and Spain, for example). We all get a little annoyed when we have to pick up the dinner check for the broke buddy in the crew, right?
On the immigration front: They don’t need to build a wall (insert obligatory Trump joke here) because they are an island. Britain’s inclusion in the EU meant they were “forced” to take in refugees. By forced I mean told by the EU they had to take them. A little like the in-laws moving into your house during the financial crisis because they lost their house. Clumsy analogy but you get my point.
The Brexit is a LOT more complex that a few paragraphs and 900 words can explain. I encourage you to do some research if you are interested in this topic. Or you can fly me out, buy a very nice bottle of bourbon and we can talk about it until we run out.
Now… What does it all mean?
For one, there is a real chance that Britain will call for another vote and that this time it might lose. In my opinion, some of the people who voted in favor of the exit were a little surprised that it won. Yes, they wanted to express themselves via voting in the referendum but they didn’t actually think it would win. It will be like getting a redo on the bad decisions you’ve made, the ones that usually start with handing your buddy your beer and saying, “Hey, watch this!” Just imagine if you could have all of those choices back.
Secondly, I think it’s safe to say that in the short term Britain’s economy will go up and down more often than a hot air balloon festival. Initially, their currency and their stock market were in a race to see which could hit terminal velocity fastest. Many of the “leave” camp felt that the doom and gloom associated with what would happen to the economy were political scare tactics to get people to support staying in the EU. And just because there is an early freak out that doesn’t mean it will be the end. Personally, I see it as a punch in the gut that the already wobbly economy didn’t need; it won’t help it near term. But long term it’ll be alright. Like many things, it becomes the “new normal.”
Lastly, it’s just going to be a roller coaster for a little while. On a global level, we are still learning exactly how intertwined our economies are. We also need to remember that Britain has two years to move through their exit (if that happens) and it will all hinge on the trade deals that they are able to negotiate between now and the exit. They have a little time to decide if they want to call a do over. And then they have two years to work on cutting their trade deals (but I have a sneaking suspicion that the people they will be dealing with are going to cause them a little pain for voting out).
Until next time, let’s at least “Be excellent to each other. And party on, dudes.” Try not to panic. Do some reading on what is going on. Pop some popcorn and watch how this plays out. But most importantly – think. Think about what this could mean for your local market and for your clients when they ask, “How’s the market?”
This blog is an excerpt from a recent training webinar. You can watch the full webinar below.