A Recent Lesson on Market Moving Events
It has been nearly seven weeks since the U.K.’s June 23rd referendum, or Brexit, vote. The shocking result, in which Brits elected to leave the European Union, roiled global financial markets. Major European equity indices tumbled the following day, with some plummeting over 10%. The British pound dropped to levels not seen in over three decades and government bond yields around the globe slammed through the floor as investors scrambled for safety.
In the days following the Brexit vote, the MSCI World, TSX and S&P 500 indices were off by 7.4%, 3.7% and 5.8%, respectively, at their lowest (measured in Canadian dollars). Scathing reports from news outlets and many market pundits were constantly front and centre, painting varying pictures of what doom potentially lay ahead.
Now that we are over a month removed from the initial reaction, the dust has seemingly settled and the apocalyptic-style headlines have begun to subside, we thought it would be a good time to revisit this event and investigate the market reaction to other shocks that have occurred over the past few decades. The lessons of the past may allow us to be better prepared to deal with the fallout of the next large-scale event that creates market chaos.