The world was shocked when Britain voted to leave the European Union, and the financial markets reacted accordingly.
The pound lost nearly a tenth of its value against the dollar in a single day, and the UK’s FTSE 100 stock market index crashed. It had plunged by nearly 9% the day following the vote to leave, closing down 7.2% by the end of the day. This is a larger single-day drop than when Lehman Brothers went under during the financial crisis. Globally, stocks lost a collective $2 trillion in market value.
The old adage that you should buy when everyone else is frightened held true. And now, less than week later, the unimaginable (if you believe the liberal gloom and doom) just happened: markets are already practically back to normal.
BREAKING: Britain's FTSE 100 index recovers all losses from Brexit
— Reuters Business (@ReutersBiz) June 29, 2016
Interestingly enough, while American markets are rebounding too, they haven’t yet rebounded to where they were before the Brexit. Americans markets are influenced by a whole different range of factors, however.
Liberals had predicted long-term, even unrecoverable market gloom and doom. George Soros, for example, had been warning a Brexit would cause a “Black Friday” type of event, referencing our Black Thursday and following Black Tuesday stock market crashes that preceeded the Great Depression in 1929. He was certainly right that there was a Black Friday, but five days later we saw a recovery, not a second crash.
[Note: This post was authored by Matt Palumbo. Follow him on Twitter @MattPalumbo12]