by Teresa Kuhn JD, RFC
President/CEO, Living Wealthy Financial Group
One of the many unfortunate side effects of globalism is the inevitable market reaction to any unexpected event. When a thread comes loose in one country, no matter how far away that country may be, it usually results in upheaval everywhere else.
Britain’s recent decision to exit the European Union was a shocker that blindsided everyone from policy pundits to betting parlor odds makers. Most of the experts thought it inconceivable that Britain would ever decide to leave the European Union, no matter how unpalatable the bureaucracy was to the average Brit.
That’s why the vote to exit has sent most major markets into panic-driven slides, with Wall Street poised to have its’ worst month since January.
Markets are notoriously unpredictable so it’s hard to know what impact “Brexit” will ultimately have on Americans and how long will this impact last.
My own research indicates that Americans can expect the following as a result of the decision to leave:
1. A stronger dollar.
While this is great for tourists planning their European vacations, the long term effects of a strong dollar on the economy are not well understood. Even experts disagree on whether the return of a robust dollar is a good thing or a bad thing. One outcome that is nearly inevitable is that a strong dollar gives the Fed another reason to avoid raising interest rates. Fed Chairwoman Janet Yellen recently admitted that “Brexit” concerns were indeed a factor when she decided not to press ahead with plans to raise rates.
2. A potential re-finance boom.
Pressure to keep interest rates at historic lows could trigger a new wave of refinance as home owners scramble to lock in rates that will save them thousands on their mortgages.
3. Falling CD and Bond Yields.
Another potential impact from the dollar strengthening against the pound is that yields from U.S. certificates of deposits and treasuries could drop significantly. Bond and CD yields move in the opposite direction of their pricing. Since yields are already very low, further drops would be harmful to more conservative investors as demand increases and yields dry up.
These are only three of the most immediate economic results that I see coming from “Brexit”. There is no consensus among economists regarding the long term effects of this decision.
If you have optimized your Bank On Yourself policy, you have safeguarded your wealth against some of these negative impacts. You also have the means to take advantage of opportunities to make solid investments and purchase quality stocks at lower prices.
Living Wealthy Financial will continue to monitor the situation overseas and give our clients insights and information to help them make the best possible financial decisions possible in this uncertain world.
If it has been a while since you’ve spoken with us, call (800)382-0830 today and make an appointment to discuss your questions and concerns.