After Brexit, markets take stock
NEW YORK—A week after Britain’s shocking vote to leave the European Union, markets seem to have pushed the pause button.
After a two-day spree of near panic selling that wiped out an unprecedented $3 trillion from global markets, investors, analysts and pundits in the US and abroad spent the week following the vote collectively revising their knee-jerk reactions to what has become known as the “Brexit” vote.
A week after Britain’s historic “leave” vote, what’s the outlook for markets and the economy? Is the sky really falling, or are there opportunities, if not silver linings, for investors?
European fallout
Worst off, predictably, will be Britain. Its finance minister, George Osborne, warned Friday that the referendum is “likely to lead to a significant negative shock for the British economy.” The Institute of International Finance, a think tank for the banking industry, predicts Britain will slide into recession in the second half of this year.
Global fallout
Outside Britain and the euro zone, a consensus is emerging that the damage will be contained.
While the direct impact on the US of weaker economic growth in UK isn’t large — American exports to Britain account for only around 0.5 percent of U.S. GDP — the primary economic challenge is expected to be uncertainty.
US economy
Economists, impressed by the vitality of American consumers, expect the economy to grow at least twice as fast from April through June as the 1.1 percent rate in the first quarter. Consumer spending accounts for 70 percent of economic activity.
The Federal Reserve reported Wednesday that 31 of 33 big banks passed an annual checkup meant to show whether their finances are strong enough to withstand a major economic downturn.