British Brexit Bust

Disgruntled populism is sweeping the world. In its severest form it has caused war in the Middle East and supports dictators like Putin in Russia. Closer to home in the West this phenomenon threatens to propel a carnival barker showman to the US presidency and remove Great Britain from the European Union. With the Brexit vote upon us what does that phenomenon hold for Brits? Our opinion is that there will be a British Brexit bust. The issues are clear. Many British are tired of immigration related issues and the sense that they are losing the nation that their grandfathers fought and died to defend. They will vote yes for leaving the EU. Others remember the reason for the EU as a united Europe has not gone to war with itself for 70 years which is a historic achievement! And there is strength in numbers in being in the largest world market on a par with North America. The bottom line is that if the populists win there will be a British Brexit bust of historic proportions.

Which Stocks Should You Short?

USA Today looks at how Brexit could affect your portfolio.

Wall Street already has a good idea of how most financial assets will react if Britain votes for a “Brexit” – or an exit from the E.U. They also know who the winners and losers will be in the event voters opt to “Bremain,” or remain in the 28-nation economic and political union.

A Brexit, which would mark the first time a country left the E.U., is viewed as the worse-case scenario for global financial markets. The market pain could be steep largely because global markets have been betting on Britain voting to stay in the E.U.

Chris Konstantinos, director of international portfolio management at RiverFront Investment Group, says the market impact will be “negative everywhere, but acutely felt in the U.K.,” where the bulk of the economic damage and uncertainty will be felt.

A sharp decline in the value of the British pound is forecast. Billionaire investor George Soros says it could drop 15% to 20%. U.K.-based stocks are also expected to suffer sizable declines, especially banks and other financial shares. The blue-chip FTSE 100 index will likely take a hit.

Stocks and commodities will fall and the GBP may drop as much as 20%. Safe haven currencies like the USD, Yen and Swiss franc may pop up and stocks outside of the UK may benefit as investors flee stocks in the UK.

How Much Will the Pound Suffer?

CNBC believes that the pound sterling will tumble if the populists win the referendum and Britain leaves the EU.

If the U.K. voted to exit the European Union (EU), currency traders would likely dump the pound and send funds into the dollar, FX pros said.

A British Brexit bust will leave the pound weaker, the dollar briefly stronger and Great Britain a mere shadow of its former glory. Will Britain be without a seat on the UN Security Council, a voice in European affairs for which it fought and laid down lives? This may be the nature of the British Brexit Bust.