Now that the initial shock of the UK’s referendum vote to leave the European Union on June 23rd (nicknamed “Brexit”) has subsided, many investors are looking to history as a model for their investment strategies.
Ned Davis Research group looked at 51 major crises in the 20th century and measured the response of the US markets over time. They found that the Dow was actually 6.3 percent higher than it was before the initial plunge for events like Pearl Harbor, the JFK assassination, and even 9/11.
From this study, analysts at Ned Davis Research said that markets were drastically overreacting to the Brexit debacle.
Vincent Deluard, who is the head European Strategist for this company, said he believes the Brexit vote is a real non-issue. In the end, Deluard says, there will be no real change in the EU. Brexit negotiations will just be another instance of European policymakers kicking the can down the road.
Financial experts advise Americans to remain calm. The main thing the British referendum did was to set into motion years of negotiations between the U.K. and the EU. These negotiations will last at least two years, and they can be extended.
In all this time, the U.K. will remain within the EU trading zone and will be beholden to EU laws. Again, nothing has really changed. Also, because the referendum is non-legally binding, British Parliament could simply disregard it in the future.