The Brexit vote (U.K. citizens voting on whether to leave the European Union) is this Thursday, June 23, 2016.
- I believe the U.K. will vote to remain.
- We should know results by Friday morning.
If the stay vote wins, British and European stock markets should rally in the near term on positive sentiment, and short covering / the unwinding of trades geared towards exit (a lot of these trades were put on a couple weeks ago). Once this is done, market sentiment may realize that nothing much has changed and Europe remains stuck in an anemic quagmire; in which case markets may regret their exuberance and retreat a bit. We remain in the summer doldrums and European Central Bank (ECB) bond purchases are already baked into a lot of investment forecasts.
If the vote is for exit, expect global stock markets to retreat in a major short term risk off move, the euro and then pound to decline, the yen and U.S. dollar to rally, and U.S. Treasuries to rally. If they exit, I am starting the campaign for the U.K. to become our 51st state; England can then compete with Hawaii as a domestic island destination.
Additional disclosure: We make no recommendations and we may initiate a long or short position at any time in any asset class discussed or not discussed.