The 52.1% approval of Britain’s voting population to leave the European Union is yet another example of two classes of people and their perspective of the world. Peggy Noonan, weekly columnist for The Wall Street Journal and former primary speech writer and Special Assistant to President Reagan, wrote an Op-Ed in the Wall Street Journal earlier this year outlining the differing views by the “unprotected” and “protected.” The “unprotected” are those who worry about their kid’s safety in public schools, keeping their jobs (if they have one), paying bills, and staying in the house they live in. The “protected” don’t have any of these worries. Her observation is the “protected” have done a poor job helping the “unprotected” and now after decades the “unprotected” are done with the “establishment” politicians and policies. The unprotected are not listening to the protected anymore and taking matters into their own hands.
Reported this weekend in the Wall Street Journal:
“Never has there been a greater coalition of the establishment than that assembled by Prime Minister David Cameron for his referendum campaign to keep the U.K. in the European Union. There was almost every Western party leader, most of their troops and almost every trade union and employers’ federation. There were retired spy chiefs, historians, football clubs, national treasures life Stephen Hawking and divinities like Keira Knightley. And some global glamour too: President Barack Obama flew to London to do his bit, and Goldman Sachs opened its checkbook. And none of it worked. The opinion polls barely moved over the course of the campaign, and 52% of the Britons voted to leave the EU.”
Barron’s reported this weekend that over $2 Trillion was lost in capital on Friday with billions more lost on Monday. Now burning up the media airways is what is next. How many other countries will begin their individual referendum and vote to leave the EU? London, as the premier financial center, is in jeopardy of losing 10,000+ jobs as major companies will not have unfettered access to the EU. Jaime Dimon, CEO of JP Morgan released a statement on Friday stating no decisions have been made yet regarding their more than 16,000 employees in the UK. Yesterday the S&P and Fitch downgraded Britain two notches and Moody cut UK’s credit outlook to “negative”. Today, Richard Branson stated that Virgin lost a third of its value due to the Brexit referendum.
Without question, there are more questions than answers. What is certain is investors now have another issue to contend.
US stock markets continued their selloff today with the DJIA dropping 260.51 points (1.5%), the S&P 500 dropping 36.87 points (1.81%, and NASDAQ dropping 113.54 points (2.41%). This is a key time to watch all asset classes and how they are performing. Investment opportunities are abounding as money is rotating among asset classes. Growth stocks that include airlines, financial institutions, and technology are being sold the hardest along with the pound currency down 12% in two days. US treasuries, bonds, utilities, and the dollar are rallying as investors seek safer havens. US residential real estate may get even more tailwind of growth as mortgage rates are projected to decline to new lows with the 10 Year Treasury yield closing at 1.43%.
Pay attention to your investments from real estate to your 401k to monitor how they are performing over the next several weeks. What you learn over the next several weeks of monitoring asset classes will be helpful over the next several years as the process of the UK exiting the European Union will take years to execute.
Please drop us a line to let us know your thoughts.