Synthetic Emotion
Whether the UK votes to leave the EU or remain within it, the world is highly unlikely to end. But the vote will almost certainly be very close with the ultimate outcome impossible to predict. For that reason, markets will move!
If there’s one word that sums up the Brexit chatter that’s currently pervading the mainstream media, it’s emotion. We all know that emotions – in particular fear and greed – are what drive a good portion of the financial markets, if not all of them.
This report aims to break through this wall of emotion and bring you as close to the facts as we can. We’ll then look at some examples of UK stocks that could provide attractive opportunities to investors as well as some examples of those that might be best left alone or even sold short.
Hopefully, once you’ve read this report in which words like ‘immigration’ and ‘security’ will be conspicuous by their absence from here on, you’ll be in control of your emotions so that you can capitalise efficiently on the opportunities presented by those who aren’t!
Where will the action be?
This is the reason we’re getting this out to you now. It’s natural to assume that the markets will react to the outcome of the in/out referendum, but we don’t believe that’ll happen. Research and consensus seems to indicate that:
- Market action is likely to be pre-emptive in nature, not reactive
- The Pound Sterling will weaken
- We shouldn’t worry. Whether or not the UK leaves the EU, we will all still be here after the referendum.
So what’s special about these 3 key points?
There’s already a lot of fear in the financial markets, as is always the case when some form of uncertainty creeps in. While a lot of the uncertainty to do with China and commodities has been priced in leading to strong rallies in metals, mining stocks and other EM-exposed shares, a new wave of Brexit uncertainty is washing over the markets. Markets don’t like uncertainty, and they sure as hell don’t like change. Therefore a Brexit is likely to be seen as a negative thing.
The more fearful the markets become that the UK will leave the EU, the more ammunition that will give to pro-Europeans who will use that fear to reinforce their (already fear-laden) arguments. The ensuing snowball effect is already underway and will not only see big moves in equity markets and FX. It will also likely see the British public eventually vote to remain in the EU. These are observations arrived at through reason, not emotion.
The fact that market action will be pre-emptive and driven by emotion means that there are opportunities in the market right now that will not be there on 23 June.
It’s at times like this that opportunities spring up. The smart money always starts buying when everyone else starts panicking. It sells when everyone else is gripped by mania. The smart money gets damn good deals that way.
