Brexit Vote Causes Global Market Declines

Today was an incredibly rough day for the global market, and for good reason. Today was the day that the results came out with regard to a Brexit vote. Unfortunately, the results were the furthest thing from positive. Today, we’ll talk about what a Brexit is, why the vote led to market wide panic, and what we can expect to see from the markets moving forward. So, let’s get right to it…

What Is A Brexit?

The term Brexit is actually a play on words. The term combines the words British and Exit to explain a relatively simple concept. A Brexit describes the action of the UK leaving the European Union.

You see, there are several politicians and other experts that believe that the relationship between the UK and the EU has been a very one-sided one. In fact, many argue that this relationship is why the UK has dealt with tough economic times as of late. As a result, some politicians pushed for an exit from the EU.

On the other hand, there are plenty of experts who see leaving the EU as a bad thing for the UK. These experts argue that while the relationship has led to additional economic hardships, leaving the EU would cause further economic pain.

As a result of the indecision among politicians, the UK left its fate up to a consumer vote. That vote was held yesterday, and the results of the vote became available early this morning. With a 51.9% to 48.2% vote, the British people made the decision to leave the EU.

Why The Vote Caused Market-Wide Panic

Today was a rough day on the market as a result of the Brexit vote. The Dow Jones Industrial Average slid by more than 600 points, the NASDAQ slid by more than 200 points, and the S&P 500 shed 75 points. Looking around the world, we saw much of the same. No matter what country’s market you were looking at, chances are that you saw red. So, why was the affect so negative?

Well, with the decision made for the UK to leave the European Union, we’re likely to see big economic issues in both regions. The UK will be forced to renegotiate global trade agreements while the EU no longer has the UK’s strength and stability to fall back on.

Due to global trade, when one large economy struggles, the world tends to feel the pain. With two of the world’s largest economies headed for big issues, the overall consensus is that the global economy isn’t going to take this well. Of course, this will weigh heavy on corporations, leading to massive declines in the market.

What We Can Expect To See Moving Forward

While I would love to tell you that we’ve seen the worst of the market’s reaction, that simply isn’t what I see coming. The truth is that this is huge news, and it’s going to be followed by a huge reaction. In my opinion, we’ve only seen the tip of the ice burg so far. At the end of the day, the market isn’t likely to see a strong recovery until economic conditions around the world prove to be positive. With economic hardship on the minds of investors, we’re likely to see more large declines in the coming weeks.

What Do You Think?

Where do you think markets are headed and why? Let us know your opinion in the comments below!