England Vote Presented Uncertain Future
England had a
historic vote and half the population was ecstatic, believing things would get
better overnight while the other half was wondering what it really means for
their country.
The reality that will
settle in for the British people is that there will be no instant change in
terms of economic growth, prosperity, and happier citizens. Instead the future
is fraught with more uncertainty than has been present in England since WWII.
Revolutions sound
wonderful, until the hard work of adjusting to massive changes begins. For the
US Stock Market, the impact will be specific to corporations who are heavily
investing in the United Kingdom or have more than 10% of their revenue income
from England.
Those corporations
who do not have a strategic interest in Britain, will continue to grow on their
original business cycle path with minimal disruption.
England, being an
island nation imports heavily but the US is not its largest import
country.
The US is one of
the more important countries for exports for the United Kingdom.
The changes going on
in England could potentially cause the British pound to fall in value against
the US dollar, making imports cheaper from the UK for US citizens, companies,
and corporations.
England Exports:
1. The mainstay of
England’s exports are Professional, Scientific, and Technology Services.
As a small island nation, services are a huge part of its economy.
2. Information and
Communication Technology are the second largest export from the UK to the US.
If the pound loses value which is likely, then these services will be cheaper
for US corporations.
3. Financial and
Insurance Services are the third largest export. This is a big part of the
financial industry, and again lower pound values will make these services less
expensive to US corporations, and the financial industry in the US.
However the
percentage of UK exports to the US is small by comparison to the exports
to Russia, Canada, India, United Arab Emirates, Germany, China, Hong Kong, and
other countries. The US does not import or export heavily with England.
Although the US Stock
Market sold off sharply on the day of the news of the Brexit vote passing with
a small majority, the overall long term impact will likely be less than many
traders and investors believe.
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The hardship will be
felt mostly in England as the total reinvention of their economy, financial
system, Trade Agreements with other countries, Treaties, and standing in the
world will be changing slowly over a far more extended period of time than many
British may realize.
Summary
Change is exciting to
imagine, but in reality change of this magnitude is always much harder with
many surprises, disappointments, and challenges.
Most US companies are
well postured to weather the storm of news media hype which inspires panic,
fear, greed, and volatility in the markets. After the people of the world tire
of this story, the markets will return to the underlying fundamental values
that drive economies worldwide.
Want deeper detailed
facts about the British Brexit Vote? How it could impact your held stocks?
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magnitude, long lasting and far reaching effect this vote presents.
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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
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