So it looks like Brexit took most investors by surprise, including me. Although the referendum was clear in issuing a populist wake up call, it’s important to keep in mind that the legislative process still has final say on EU participation. With that, it remains to be seen if the UK really does leave the EU. Anything can happen.
In any event, the surprise result caused North American markets to open with significant volatility. However within the first 15 minutes of trading the hallmarks of systemic risk faded, and it looked like just another run-of-the-mill bad day. If I had slept in and come to work late without reading the paper, the decline would be indistinguishable from other bad day blips. As of this afternoon, data suggest we might be wise to expect some more fluctuations into next week, but I would hesitate to assume catastrophe and/or significant declines over more meaningful horizons. Ultimately, the Brits and Europeans will come to some sort of resolution, markets will go on, companies will keep operating, and people will keep investing.
A gentle reminder to all the panicky Petes, negative Nancys and worrier Walts out there: stick to your plans, people. You came up with them in the good times based on long term decisions and ample data so you would do the right thing when faced with bad times, the temptation of chasing short term returns, and unknowns.
During times like these I often review the chart below. It illustrates two very simple facts. First, over time there are far more good years than bad. And second, as my assistant Donna reminded me this morning, we’ve made it through some tough markets before, and we’ll do it again.