What Is Brexit And How Is It Affecting The Market?
By Todd I. Youngdahl, CFP®
You’ve seen it all over the news. Brexit this, and Brexit that. But what does it all mean? Should you be doing something to prepare? Should you be worried? I wish I could say there was a clear-cut answer. But the truth is, it’s complicated. And nothing is certain.
However, that doesn’t mean you should live in a bubble and ignore what’s happening; that’s a bad idea. Why? Big changes like Brexit affect everyone. Things can go one of two ways. You can be on the losing side, hit hard by market instability and economic downturn. Or, you can be on the winning side, poised and ready to take advantage of new opportunities. That being said, let’s take a bird’s-eye view of what Brexit is, what’s happening now, and how it could affect the market in the future.
Brexit is short for “British exit.” It refers to the United Kingdom’s decision to separate itself from the European Union (EU). The UK has been part of the EU—a political and economic agreement between 28 European countries—since 1973. Countries that are part of the EU are obligated to follow the union’s laws and regulations, even if they aren’t in the best interest of the individual country. That is one of the reasons why UK citizens voted to leave the EU in June 2016. Since then, the UK has been working with the rest of the EU to create a “withdrawal agreement” to make the split as smooth as possible. Many people and businesses will be affected by Brexit, and part of the withdrawal agreement includes a “transition period” that will give everyone time to adjust after the split.
What’s the Problem?
The problem is, they haven’t been able to come to an agreement. The date set by law for UK’s exit is March 29, 2019. So far, Prime Minister Theresa May’s initial plan was defeated, and most parties involved feel there has not been a viable Plan B proposed after the initial Brexit plan. If an agreement isn’t reached, the UK may leave the EU without a withdrawal agreement, the deadline may be extended, or Brexit may be canceled altogether. It’s hard to say. All we can do is wait and see how everything plays out.
What Does It Mean for You?
Since we don’t know exactly how things are going to unravel, it’s hard to predict how it might affect you. However, if Brexit happens, there will be some major shifts in the political and financial sectors. The strongest negative impact will be felt in the UK itself but will likely ripple into the global market. For example, London is Europe’s financial capital, a central hub for international commerce. With Brexit on the horizon, banks are starting to move their operations elsewhere. Where will a new financial capital form? Will it be concentrated in one city or spread out over many? With relative economic stability in the U.S., the new financial epicenter could end up being New York City. This could have huge implications for the U.S. market.
With so much up in the air right now, it may be difficult to know what to do. Connect with us to address any concerns you may have and to ensure that your investments are protected from any potential negative effects of Brexit. If you’re interested in learning more, contact us at 703.584.2700 or email@example.com.
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