Brexit, Chased By A Bear Market

Turns out throwing the European Union into existential chaos is not good for the world's wallets

God save our trading screens. — (REUTERS)
Jun 25, 2016 at 11:01 AM ET

Markets did something pretty predictable as they opened on Friday morning after the Brexit vote. They plunged, reacting to news that Britain had decided to leave the European Union, triggering a financial meltdown that was, by some measures, worse than anything seen in a generation. The British Pound plummeted in value, taking a raft of other currencies down the hole with it. And around the world, stock markets shed trillions of dollars of value.

First into the abyss, by dint of their position on the planet, were ealy-opening Asian markets, with Japan’s Nikkei the worst hit of all major indexes, proportionally, worldwide. By close of trading, it had lost 7.92 percent of its value—the largest one-day decline it had seen since the year 2000.

London’s FTSE 100, located right at the heart of the crisis, lost 8 percent of its value within minutes of opening, but clawed back some of those losses when Prime Minister David Cameron announced that he would resign, finishing the day down by just over three percent. Let that sink in for a second: Britain’s most influential share index was calmed by the notion that the leader of the country quit his job. That’s a good measure of how rocky a day it was for financial houses—the worst day in London since U.S. investment bank Lehman Brothers imploded and triggered a global financial crisis (now a major motion picture).

As the day progressed, calls for similar referenda were heard from the Netherlands, while grumblings of secession and reunification, respectively, could be heard from Scotland and Northern Ireland, faced with the prospect of ending up outside the EU.

Some of the financial bedrock began to shift immediately in “The City,” as London’s financial center is known, with rumors that investment banks like Morgan Stanley, Spanish financial giant Santander, and others would pull staff out of a non-EU Britain and relocate them to other EU centers. Jamie Dimon, boss of American bank JP Morgan Chase, issued a long memo to his global staff signaling major restructuring in the short-term (the bank set records for currency trading on Friday as people tried to either take advantage of, or stem losses from the panic). The forthcoming redistribution of financial talent marks the end, potentially, of London as a rival to New York as a central hub in the global financial system.  Major markets in France and Germany also took significant hits, and U.S. markets, too, felt the ripple effect of Europe’s uncertain future.

Across the board, stocks, indexes and currencies flashed red all day as losses racked up. Perhaps the only saving grace of the vote’s results coming in on a Friday morning is that there was only one day of trading left in the week, the quick transition into the weekend allowing for some reflection on what has come to pass, and what it will all mean in the weeks to come.

And if all that still leaves you scratching your head about how, if at all, this should make you feel, worry not. There are enough millennials working the markets that the chaos was translated into web form, so that all age groups had a way to understand what feels a major market crash should inspire.