Brexit Fallout: No Fear

   On Thursday June 23rd, a referendum was held in the U.K. as to whether they would remain in or leave the European Union. The referendum announced a historic decision that shocked global markets: they would leave. The impact on the pound sterling was immediate, as the pound has dropped to a  30 year low against the dollar. Global investors have been losing confidence in the British economy as Standard & Poor's has lowered the U.K.'s credit rating to 'AA', down from 'AAA.' Economists and banks have drastically cut growth forecasts for GDP growth in the U.K.

   The situation in the U.K. is being described as the start of a "political crisis", and market scenarios indicate a recession is expected in the U.K. for at least the next six months. Gold stocks have soared, and many investors are selling U.K. linked financials. Meanwhile the media headlines go something like this:

   "Good luck"
   "A tragic split"
   "Britain jolts the world"

Or this:

   "The British are frantically Googling what the EU is hours after voting to leave it"

And this:

   "Anger over 'Bregret' as Leave voters say they thought UK would stay in EU"

   Many of the mainstream media reactions regarding the Brexit decision are that of despair, anger and regret as shown above. But the story that media continues to push: that UK markets will tumble further is only harming the markets even more. The stock market is very much a psychological game. Investors tend to react to positive news with exaggerated confidence (meaning they will take more risk), and react to negative news with the opposite effect. In this case, gloom and doom reporting by the media has a powerful effect on investor psychology, and this can lead to less investor confidence and more volatile global markets.

   It is best to avoid buying into the mainstream narrative that often invokes a fear response in investors which if not contained, can lead to a very drastic situation. To quote Franklin D. Roosevelt: "the only thing we have to fear is fear itself." Don't overreact and don't pay much attention to mainstream media. Let us embrace a more independent British nation.