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Post-Brexit: European Markets Have Rebounded, but for How Long?

LONDON—ETFs tied to UK and European stocks and currencies have stopped falling but have yet to regain all they lost following the Brexit vote.

By Natalie Dolce | nataliedolce | | Updated on July 05, 2016
Photo by Petr Kratochvil, via Wikimedia Commons Photo by Petr Kratochvil, via Wikimedia Commons
LONDON—“The immediate aftermath of Britain’s exit from the European Union—known as “Brexit”—had all the hallmarks of a major financial crisis. And the narrow victory of British citizens that wanted to leave (51.89%) versus those who wanted to stay (48.1%) only added to the suspense. Once the referendum results became official, global financial markets, led by a collapse in Eurozone assets, went into a tailspin.” Those thoughts come from a recent article from GlobeSt.com’s sister publication, ALM’s ThinkAdvisor.com. The article says that ETFs tied to British stocks like the iShares MSCI United Kingdom ETF (EWU) fell 13.16% from June 23 to 27, while the CurrencyShares British Pound (FXB) dropped 10.03%. The rest of Europe’s stock market, as tracked by the Vanguard European ETF (VGK) followed suit by crashing 10.90% in just a matter of days. The CurrencyShares Euro ETF (FXE), which is linked to the euro’s performance, held up much better but still managed losses of 2.56%. All the steep losses suffered as a result of Brexit have since subsided but prices have not rebounded to levels that existed before the vote. The article says that British and European equities were down only 4% and 4.6% as of the close Thursday, June 30 compared to double-digit losses just a few days before. Although the British pound is still down around 9% since the referendum’s results, some see a major buying opportunity. Well before Brexit, the overall trend in European stocks and currencies had been down, the article says. “Over the past two years, the euro has declined 19.5% while the British pound has slid 22.3%. Over the same period, British stocks have fallen 19.7% and the rest of European equities are down almost 17%. By the bear market standard of a 20% decline from peak to trough, most of these markets are in a verified bear market.” Click here to read the full article.

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