Thursday's U.K. vote to leave the European Union is throwing global markets into turmoil, pushing the British pound lower against major global currencies and threatening to unravel the EU itself.
British Prime Minister David Cameron has already announced his resignation as the world's fifth-largest economy seems poised to go into a recession. The Federal Reserve will likely hold off on any interest rate increases in the near future as markets look to regain their footing. Stock indices are rattled, as few experts accurately predicted the vote's outcome.
So it's an awful day for investors, right? Maybe. But this is no time to panic.
"If you're actually a buy-and-hold investor, nothing – not a Brexit, not a flash crash, not an alien invasion – should have you bailing right now," says Kyle Woodley, managing editor of InvestorPlace.com. "Yes, the S&P 500 losing roughly 4 percent today to sit around 2,000 isn't a pleasant thought ... until you realize that's nearly 30 percent better than where we were sitting before the market started to tank in 2007."
In fact, the Dow Jones industrial average and the Standard & Poor's 500 index both rose nicely in the week before Thursday's vote, so losses realized today and into next week will largely only serve to wipe out short-term gains. And even with the market opening more than 2.5 percent down Friday, Wall Street is nearly even for the year to date.
A 'knee-jerk' reaction. Today's market turmoil is nothing more than a "knee-jerk reaction" as investors try to reposition themselves following a surprise vote, says Michael Kramer, a portfolio manager on Covestor, the online investing company, and founder of Mott Capital Management, a registered investment advisor in Garden City, New York.
"The markets have been caught completely off guard by these results," he says. "The expectation into this event was for the U.K. to remain. … The results of the vote will take a long time to play out."
Britain leaving the European Union is another example of how political events are unpredictable, says Yale Bock, a portfolio manager on Covestor and president of Y H & C in Las Vegas. "From a financial perspective, it introduces the lingering question of the strength of the European Union and these issues will not be solved quickly, so political uncertainty will be in the market for a while."
Bock says Wall Street will still revolve on profits and earnings from individual companies, not political turmoil. "The fluctuations in currencies and regulatory changes and their impact on specific companies will get digested over time," he says. "Some of the reactions in markets will be extreme and in time should moderate."
"We had a big relief rally in expectation of a 'stay' vote, so hold on to your hats because markets now have to reprice for the outcome," says Greg McBride, Bankrate.com's chief financial analyst. "Today will be an ugly day in global financial markets. But since nothing will change right away, a market overreaction presents an attractive buying opportunity."
Jason Raznick, founder and CEO of Benzinga, a financial news and data outlet in Detroit, is also bullish on stocks after the vote.
"This can actually be a good thing for long-term investors looking for a buying opportunity," he says. "Remember that the market always rebounds. If you're really spooked, there's no harm in waiting this out, but overall I definitely wouldn't be afraid of the market
TLM Price at posting:
37.5¢ Sentiment: Buy Disclosure: Held
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