Smartest Investors in the World Aghast at Post-Brexit Market Rally
Financial markets are always unpredictable–that’s why investing is risky. Every winning investment usually involves someone losing money, and predictions about major trends and events—such as Britain’s exit from the EU–are rarely incorrect. However, the timing is more difficult to pinpoint, but timing is everything in financial markets.
That’s why day trading has become so popular with today’s connected investor. Britain’s decision to leave the European Union, which is commonly called Brexit, flabbergasted economic forecasters. Everyone predicted that Britain would face some severe economic growing pains that the world would probably share, but a Zerohedge.com report finds that global financial markets are doing surprisingly well after some initial losses due to the surprising vote that had been predicted to go the other way.
Experts Scramble to Explain Surprising Worldwide Economic Advances After Brexit
Top money managers across the globe are at a loss to explain how quickly Britain, European and other markets have recovered from the startling news. Respected analysts continue ringing alarm bells, but the markets seem to be taking things in stride after the initial 10-day squeeze. Positive steps in the market after Brexit include:
- An unprecedented market surge as investors scramble to find dividend-paying stocks
- Largest inflow of bank loan applications seen in three years
- Global stock increases that have added $4 trillion to the value of equities worldwide
- Huge increases in dividends and buybacks
- All-time highs reached daily for the S&P Index
Nobody expected this kind of favorable news, and experts worry that the bad news is yet to come. Experts predict that the rally will be short-term unless numerous conditions are met. These include governments committing to economic stimulus packages. Brexit has many governments so worried that they’re considering traditional stimulus packages to counter the effects of slow economies and frightening economic indicators. Anticipating a big short-term boost from the efforts of governments and central banks, many investors are willing to gamble that stimulus money and efforts by central banks will counter any downturns that Brexit might generate.
Uncertainty Is Never Appreciated when Handicapping Investments
Nobody wants an uncertain investment adviser who hems and haws about his or her recommendations, but Britain’s exit from the European Union promises a prolonged period of uncertainty and instability. A report at NYTimes.com reported that the Bank of England earmarked 250 billion pounds to deal with the fallout after the country’s unexpected vote to leave the EU. Markets always worry about unexpected variables, and Brexit promises to generate periods of anxiety for the foreseeable future.
Markets Stabilize in the Aftermath of Multiple Economic Initiatives
It seems that every country is worried about the current business and economic climate, and many countries are considering fixes, such as stimulus programs, to keep the recovery alive after the 2008 worldwide economic meltdown. The central banks of many countries are struggling to maintain the economic recovery and shepherd financial markets through the anticipated post-Brexit downturn.
Bumpy Ride Ahead for Investors, Governments and Banks
Bette Davis immortalized the phrase, “It’s going to be a bumpy ride” while sharing a car with a scheming understudy in the classic film “”. Regardless of temporary market advances and retreats, interest rates and government decisions whether to offer stimulus packages and other “economic fixes” like helicopter money, there’s going to be a bumpy ride for investors. Helicopter money refers to the idea of governments directly injecting cash into the economy instead of through intermediaries, and ramped-up discussions of using the approach are now occurring in all the economic powerhouses in both the East and West.
USAToday.com reports that uncertainty has now become more common, and hence, more predictable. Bad news often seems to result in mini market crashes that are quickly followed by rapid rebounds. These cycles have replayed frequently since the 2008 financial crisis, and Brexit followed the same pattern despite dire predictions of gloom. Brexit caused an immediate 5.3 percent drop in Standard & Poor’s Index of 500 stocks in just two days, but the stocks regained all but 0.5% within eight calendar days.
Economic conditions, U.S. presidential elections, Brexit, sluggish European markets, stimulus and helicopter money and other variables threaten investor complacency. Now–perhaps more than any time in recent history–it’s imperative for savvy investors to stay informed about financial trends, political matters and central bank decisions. It’s also important to remember that clever investors can earn dividends in any market by anticipating winners and losers. Find the latest financial news and insightful analyses about Brexit by visiting the PersonalMoneyStore.com.