Round One Goes to Sovereignty
Yesterday the PEOPLE of Great Britain voted in favor of leaving the European Union (EU). This came as a shock to Prime Minister David Cameron and many other world leaders. Cameron subsequently announced he would resign this fall as PM, a signal of disappointment and a belief that the country was destined to continue down the same path. Britain is but one of 28 members of the EU but today’s vote represents a desire among citizens for independence and sovereignty. UK is the first to leave and other countries could follow, placing a big question mark on the future of the EU.
Today, we find no shortage of expert analysis on the future ramifications to the markets and global economy. I’ve always found this activity to be less than beneficial to capital market investors. First of all, there are highly educated, intelligent people who totally disagree on the anticipated impact. This leads to confusion for investors and confusion can lead to a lack of confidence in the markets and ultimately, the success of their financial plan. Second, millions of investors make up the market constituency and the collaboration of their individual investment decisions will determine future prices. Needless to say, nobody can predict that with any degree of accuracy or consistency. There would be an inherent failure to any market that was determined (or could be forecast) by experts rather than determined entirely by the constituents (buyers and sellers). I have great confidence in the ability of the market participants, as a whole, to determine stock prices. They have a long track record of doing so efficiently and effectively.
It’s not necessary to spend a great deal of time analyzing the potential impact on Britain or the EU for the reasons just stated. I believe it is worth mentioning that history has shown that the initial reaction of the markets to a big news story, such as this, is a terrible gauge for the long term direction of stock prices.
Today’s headlines may include attention grabbing phrases such as BREXIT Bombshell, Black Friday and Global Stocks in a Tailspin but I don’t believe it can be concluded that global demand for products and services will decline because the people of Great Britain have chosen independence from a centralized decision making union. Yes, the UK will be responsible for making trade deals on their own now but this also means that they will be in charge of their own fate and accountable unto themselves. The constituents have chosen a path of sovereignty. I believe over time Britain (and possibly other countries) will do well in determining their own role in the global economy.
I know there are many out there (including some who will read this article) who focus on what’s happening in your immediate surroundings and are very good at tuning out the news and current headlines. I admire this! It’s not easy to do in today’s world but I do believe that those who are good at it live happier, less stressful lives. Have you ever had a good day ruined by turning on the news in the evening? Me too! I grew up in an era when the news was delivered by the paperboy and that familiar “thud” on the front door signaled its arrival. Now we are overwhelmed by a 24/7 news cycle and smart phones that “buzz” every time there is a news alert. How I miss the good old days!
- Rick O’Dell
