BREXIT FALLOUT: What Are They – Nuts?
Brexit is not exactly “new” news. Economists and media pundits have complained about the brokenness of the E.U. for the better part of the last decade. There are many challenges that have existed surrounding the European Union experiment since day one:
- Monetary union without a fiscal union,
- No teeth to the E.U. budget rules,
- Rich countries bailing out poorer countries,
- Benefits of liberalized trade realized unevenly throughout member nations,
- Re-Balancing current account deficits and trade surpluses
A quick Google search spits out hundreds of articles and thousands of hours of audio and video about these very issues, as well as hundreds of hits highlighting today’s media-dominating concerns about the Brexit. I refuse to take sides. I’m not at all certain that the E.U. should be dumped. Nor do I believe that the E.U. should be held together at all costs. But clearly the EU hasn’t been all roses, chocolate, and champagne for everyone. It has been a very challenging endeavor, and anything so challenging is destined to go through huge changes.
Our own U.S. history teaches us that Brexit isn’t a finality. It is a new chapter in the incredibly long discussion about the E.U.–Britain relationship. Indeed, the E.U. is just a very brief chapter in the centuries’ long discussion about the relationships among the many different E.U. countries. The discussions will continue for as long as there are nations on the continent of Europe.
Today’s overwrought headlines ignore the fundamental fact that the wheels of government grind painfully slowly. The vote happened, but it is a long road to actual British Exit. Once parliament weighs in, the whole process of unwinding British participation in the E.U. has to be re-negotiated. It means having new treaties in place with European trading partners, and lots and lots of red tape and decision making. Some negotiations will go quickly, others will take a lot of time.
What should investors do today amidst all the panic and chatter?
Nothing. There will be pundits and politicians aplenty who offer dire scenarios. There will be panic and lots of “what’s next” talk. While NO ONE WILL KNOW, too many will predict.
Don’t ever forget that there are two sides to every transaction. For every seller there will be a buyer. If you panic and sell your shares, there will probably be someone with a calm cool head that is buying them from you.
Brexit and the current market turmoil will prove to be a threat for some and an opportunity for others. History suggests that when one side of a trade is calm and rational and the other side of the trade is excited and driven by the passions of fear or greed, the patient and rational decision often proves the better one.
Don’t go nuts. Do not overreact and ruin your long-term portfolio with a knee-jerk short-term decision. Breathe deeply and stay anchored in your well-considered financial plan. Brexit, and volatility, are not new news.
Originally Published June 26th, 2016 at Huffington Post.