1. This too will pass. Markets are panicking? Markets often panic. They’ve panicked a lot worse than this many other times. And each time in the past they recovered and then some. Anyone who bought stocks after Lehman Brothers has made a mint.
2. This is much smaller a deal than everyone is pretending. The entire European Union accounts for 17% of real world economic output — adjusted for purchasing power — according to the International Monetary Fund. That’s down from 24% at the start of the millennium.
3. This is even smaller than that. The British and the Europeans are going to get together and do deals. Britain will almost certainly end up in a new, face-saving, “we’re not really in the European Union even though it looks like it” version of the EU. Everyone has an incentive to do a deal. No one has an incentive not to. And those Europeans who helped cause this by talking smack, like European Commission President Jean Claude Juncker, have now been sent to bed without dessert by their bosses.
4. People are trying to panic you. At times like this, market commentators know absolutely nothing and pretend they know everything. My eyes have already glazed over at all the ridiculous prognostications about the future I’ve read in the hours since Britain voted for Brexit. Europe “will” do this. France “will” do that. Angela Merkel “will” do the other. It’s all horse manure. Ignore it.
5. Investors can find value. The market plunge on Friday has left many stock markets looking inexpensive on long-term measures, especially in EuropeSXXP, -7.03% . The PX1, -8.04% , German DAX, -6.82% , Italian I945, -12.48% and Spanish IBEX, -12.35% markets look especially inexpensive, according to calculations provided by London-based investment strategist Joachim Klement of the CFA Institute Research Foundation. France trades at 12 times cyclically-adjusted earnings, he estimates: The historic average there is 20 times. Germany trades at 14 times (far below a cyclical average of 18 times). Italy’s on eight times (history: 20 times), and Spain on seven (history: 17). All four can be accessed by the iShares France, Germany, Italy and Spain exchange-traded funds.
6. Those less active can still take advantage of the selloff to add to their holdings in international stock funds, which include all major European and Pacific equities, and emerging-market stock funds.
7. Those buying stocks in a fire sale should, however, be prepared to feel really stupid before they feel really smart. You never catch the bottom and should never try. Prices may well get much cheaper before they turn around. The only sensible approach for an easy life is to buy little and often.
7 reasons why you shouldn't worry about the markets post-Brexit watch
- Thread Starter
- 25-06-2016 09:51