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The Brexit vote is in the books, although the economic and political uncertainties have just begun. If you care about what happened in the United Kingdom, you’ve had ample sources to consult about last week’s vote and the economic fallout. Even if you weren’t concerned about the vote, your 401k probably registered the event.
A national decision with sweeping global implications prompts us to ask what this event on the “other side of the pond” signifies about our world. In 28 years of working in the financial service industry, I’ve never witnessed the establishment’s thinking so collectively wrong. Usually 10-15% or more of institutions we deem the “Smart money” representing big institutions find their thoughts running contrary to popular thinking. Such outliers often lose. But when the minority is right, big things happen.
Leading up to the Brexit vote, the potential economic and political destruction was so great that virtually no major economic player seriously entertained the possibility that the United Kingdom would exit the European Union (EU). The surprising electoral outcome created one of the largest currency moves – in a very negative fashion – in the Pound Sterling’s history.
The United Kingdom’s vote to withdraw from the EU involved trade deals, economic policy, cross-border travel and immigration issues. And it was clear the electorate cared deeply. To put this vote in context, the largest turnout for a US presidential election in the last 100 years resulted in just over 62% of eligible voters showing up to cast their ballot. The Brexit vote had a 72% turnout!
There will be much conversation and pontification about the ultimate effects of the Brexit decision. Some voices are calling for a do-over vote. There is more confusion than clarity at the present moment. What intrigues me most is what the vote really stood for in the minds of those who voted to leave.
After the vote, the largest Google searches coming out of the U.K. included “What is the EU?”; “What countries are in the EU?”; and “What does it mean to leave the EU?” Shockingly, people turned up at the polls for a watershed election, and cast their vote for something they didn't fully understand. So what did they vote for? Apparently, freedom and self-direction.
It is easy for politicians to point their finger at previous administrations and Congress, or in the case of the U.K. the Prime Minister or the Parliament. Last week, British voters found it easy to point at the EU for their frustrations, without ever acknowledging the benefit of the EU relationship. Time after time citizens heard the EU controlled their lives, gave them little control over major economic decisions, and even threatened the security of their borders. Such rhetoric becomes familiar in political times.
The reality is that the EU relationship had both drawbacks and benefits. But clearly, the majority of British voters were not sufficiently swayed by the benefits. We should pay attention to that fact as November elections approach in the U.S.
Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column offset=”vc_hidden-lg vc_hidden-md vc_hidden-sm”][vc_widget_sidebar sidebar_id=”sidebar-main”][/vc_column][/vc_row]