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The impeccable effect of Brexit on Wall St stocks

Stronger USD will be a big problem (a) for raising rates and so to manage by the FED, (b) for China, and if China is not able to grow like prospected, then it’s going to be bad for global economy -> major global crisis, and who knows how much it will last, especially given that central banks are almost already “all in”. Stronger YEN -> Nikkei is/will crash.

Some US stocks are quite dependent on European consumption:

  • McDonald’s has 39.9% of total revenue from Europe
  • Electronic Arts has 46.5% of total revenue from Europe
  • General Electric has 27,7% of total revenue from Europe
  • Coca Cola has 22% of total revenue from Europe
  • …this could be continued for pretty much all major blue-chips stocks

Not what is the problem and impact in relation to this? It is expected that UK GDP and consumption in one of Europe’s biggest economies plummet if the vote is successful .

Not what is the problem and impact in relation to this? It is expected that UK GDP and consumption in one of Europe’s biggest economies plummet if the vote is successful .

Much of the economic impact – positive or negative – would depend on the trade deals Britain managed to negotiate with the EU and rest ofthe world after its exit.

The best-case scenario, accordingto think tank Open Europe, is that the UK would be better off by 1.6% of GDP ayear – by 2030. That is assuming the UK carried out widespread deregulation after its Brexit and managed to strike favorable trade deals. The think tank adds: “A far more realistic range is between a 0.8% permanent loss to GDPin 2030 and a 0.6% permanent gain in GDP in 2030, in scenarios where Britain mixes policy approaches”.

The Centre for Economic Performance, at the LondonSchool of Economics, says theworst-case scenario is a 6.3% to 9.5% reduction in GDP, “a loss of a similar size to that resulting from the global financial crisis of2008/09”. The best case, according to their analysis, is a loss of 2.2% ofGDP, although it does not take into account as wide a range of factors as the Open Europe study.

Remember: The Brexit is not effecteive from day one after the vote, but this will immediately be priced into the stock markets. So if this really happens one will probably see a big drop in European and US markets.

Currently Usd is going higher, like the Yen -> those are defensive currencies.

Stronger USD will be a big problem (a) for raising rates and so to manage by the FED, (b) for China, and if China is not able to grow like prospected, then it’s going to be bad for global economy -> major global crisis, and who knows how much it will last, especially given that central banks are almost already “all in”. Stronger YEN -> Nikkei is/will crash.

So, if those are the prospects, it’s ok to think that US stocks are going to get nailed today and in the short terms, *until* some new policies come out, and we can’t know if the FED will make a successful intervention today, tomorrow, or when…

 

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