World markets show drastic signs of improvement week after Brexit plunge
WASHINGTON (Talk Media News)- World financial markets showed drastic signs of improvement one week after last Friday’s post-Brexit plunge.
When U.S. markets closed on Friday, the Dow Jones Industrial Average had jumped almost 700 points higher than the same time last week. The NASDAQ had jumped nearly 200 points higher than last week’s close and the S&P 500 had jumped almost 80 points higher than that of the previous week.
European markets also showed drastic signs of improvement by Friday’s close. Britain’s FTSE 250 had jumped almost 400 points higher than that of the previous week and Germany’s DAX had jumped more than 200 points higher than that of last week’s close.
Tim Montgomerie, who is a conservative-leaning pro-Brexit columnist with The Times (London), spoke with TMN last week and said financial uncertainty in the immediate aftermath of Brexit is what caused financial markets to plunge. He also said Britain’s departure from the EU could have ramifications for the organization as a whole.
“Markets hate uncertainty and there is now going to be a period when Britain’s exact trade relationship with the rest of the European Union is uncertain,” Montgomerie said. “I think there’s also an uncertainty now in the whole future of the European Union and markets have reacted to that level of uncertainty.”
Jim Paulsen, who is chief investment strategist at Wells Capital Management, told CNBC Friday that while Brexit may present political problems, last week’s market plunge was largely the result of shocked investors dumping assets as opposed to adhering to time-proven investment strategies.
“It might be a serious political problem, but the markets are rightly finding it’s not going to be a major economic and financial hit,” Paulsen said. “You can listen to the public rhetoric and you can listen to Mr. Market… “I think the market message will be more accurate.”
Paulsen also told CNBC that market uncertainty should be greeted with enthusiasm as opposed to fear because uncertainty presents unique opportunities for bold investors.
“Whenever the fear peaks, the right thing to do: Buy,” Paulsen said.
Shaun Osborne, who is chief currency strategist at Toronto-based Scotiabank, offered a more cautious assessment. Osborne told Market Watch Friday that even though financial markets improved in the week following Brexit, the British pound is still likely to experience short-term devaluation and that that could negatively impact international currency trade.
“We think investors should be prepared for the risk of [pound] weakness extending quite significantly in the next few months, while uncertainty surrounding how the U.K. moves forward persists,” Osborne said.
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