Wall Street now worries about next week’s British referendum vote
Wall Street always finds something to worry about. Lately, Brexit fears have bubbled up to the top, as other global anxieties have subsided.
The year started out with dramatic stock market declines as global investors fretted about the pace of China’s slowdown and the effect of diving oil prices on the world’s economy. The Dow lost 1,000 points in the first week of the year and the volatility persisted until about mid-February.
Now those two fears have abated — Oil prices have rebounded to nearly $48 a barrel, well up from the lows of $26 earlier this year. China’s currency hasn’t tanked as many feared and its growth appears to be stabilizing.
But concerns have risen about the effect of next month’s British referendum vote to decide whether to stay in the European Union.
“It’s a big concern: I don’t know what unravels positively or negatively,” says Tim Anderson, managing director at MND Partners.
What seems to worry experts the most about Brexit is the uncertainty surrounding it.
There are a lot of unanswered questions about how Brexit would impact the European financial system, most of which is based in London, and the global economy. Some economists believe the concerns are overblown because even if voters choose Brexit, the actual separation won’t take place overnight. The exit would take place over two years of complicated talks.
Anderson of MND Partners says that whether Brexit fears are warranted or overblown, they could spark volatility in markets.
The vote also takes place just one week after the U.S. Federal Reserve’s June meeting. Fed officials last week signaled that a June rate hike could definitely happen. But if uncertainty over Brexit ratchets up and rattles markets in June, it could have a bearing on the Fed’s course. That too will trigger market volatility.
If U.S. markets head south because of Brexit fears — or even if Brexit becomes reality — it’s a buying opportunity, says Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.