“This is a vote that changes everything.”
That’s what the Financial Times wrote following the Brexit referendum.
The market agrees. You don’t need a rundown.
However, most everyone is missing one crucial aspect to all this. And they’re missing the opportunities created by it too.
3 Moves To Make After Brexit
Your editor tuned into BBC News to watched it all live.
It felt like a preview of election night.
The broadcasters were trying -- and largely failing -- to hide their abhorrence.
They were shocked, scared, and more than a bit disappointed in their countrymen who didn’t blindly follow the direction of the politicians and the elites.
The broadcasters and their guests believed all the warnings and scaremongering despite all the simple Brexit facts.
Honestly, we expect the eventual impact of the Brexit to be less than anyone expects.
As it stands, the Brexit is a promise (from politicians who are 70-30 opposed to the Brexit) to plan to make a plan.
Let the dragging of the feet begin.
We’re expecting five years for the Brexit process to be completed. And even then, it will only be about a 20% pull-out from the EU.
Let’s face it, the biggest businesses and most vested interests have lobbyists in London and Brussels. They will be negotiating with themselves. They’re going to get a good deal.
The market reaction to all this has been quite the opposite though.
Here’s three moves I’m personally going to be taking in the next few weeks.
Post-Brexit Move #1: Europe’s Mini-2008 Moment
The sell-off has hammered everything in Europe.
Some industries, the sell-off is justified. It may even get worse.
A few industries, however, will be minimally impacted.
Look at what happened in the U.S.
One of the best-performing large cap stocks on Friday was Verizon (VZ). It ended the day down 0.4% and is now just 2% below it’s all-time highs.
The reason...it’s a Leviathan. It is a massive and steady market. It’s not going anywhere. And it can weather most any economic downturn easily.
Brexit or no Brexit, people are going to be on their smartphones and consuming increasing amounts of data.
The equivalent in the UK, Vodaphone (VOD), hasn’t held up nearly as well. Its shares were down 7% on the day. A massive loss for such an essential-service-providing company.
If the Brexit sell-off continues next week, there will be plenty of “fish in a barrel” type buys in UK.
Post-Brexit Move #2: Forget About An Earnings-Driven Recovery
Earnings for the S&P 500 companies have been in steady decline for five straight quarters.
Next quarter will be better they kept telling us.
It never got better.
The Brexit pretty much ensures market-wide earnings aren’t going to come back anytime soon.
We expect you’ll hear the Brexit cited in at least half of all bad earnings reports for the next two quarters at least.
Post-Brexit Move #3: Go See For Yourself
Finally, I have to ask, have you ever visited the United Kingdom?
Everyone is citing the British Pound hit 31-year lows.
The hysteria is a bit overblown. The pound has been at these levels three times since 1985 relative to the US dollar.
Regardless, the UK is on sale right now.
Everything is 20% off.
From stocks to hotels, there are plenty of deals.
If you ever wanted to take in a Premier League game, get a proper scotch egg, start every day with a full English, now is your time.
Your editor goes over every year or so and those three things are at the top of the list.
It’s a wonderful and inexpensive travel option in the offseason between September and November.
The Best Of A Bad Situation
In the end, the old rule that nothing is ever as bad as it seems at the time feels like it applies here.
Britain’s exit from the EU may start a contagion. It could be the breaking of the dam leading to Sweden, Greece, Spain and eventually France pulling out of the EU.
Or, considering Britain has a special relationship within the EU, and its politicians who will be negotiating the exit terms don’t want to leave, it could be largely a minor event in the long run.
Until we see otherwise, the latter is the best bet.