Spy, usually sanguine and strolling (metaphorically) through the financial markets and (literally) through the bars of Asia with a casual air is reaching for a very stiff double drink in central Hong Kong today. His knees are wobbling and there are definitely heart palpitations. He is utterly shocked that Britons, usually so consensual and middle of the road, have voted to leave the European Union overnight in the UK. The real consequences of the vote to leave cannot possibly be known, however, Spy confidently predicts that the volatility already seen is just the precursor of far more dramatic moves to come.
For wealth managers and fund managers alike, this new political reality is going to provide investment and advisory risk on a black swan scale. The knee jerk reaction has been a dramatic fall in the value of the British pound and to a lesser extent the euro. Equity markets tumbled this morning and gold rallied. So far, so predictable. What comes next when the dust settles is far harder to predict. For one thing, we can expect to see bond yields fall even further as people run for cover.
Earlier this week, Spy was feeling confident. A GAM survey of professional investors conducted in London arrived in the Spy's inbox. It showed 71% believed that the UK would remain part of Europe and only 29% believed a Brexit would occur.
The establishment has been given a proper British-style hiding and there are surely a great number of economists, strategists and bookies who will be feeling numb today.
Spy is not in much of a gossiping mood, so this week’s remarks are short.
Leaving the Lan Kwai Fong bar, Spy did manage to raise his phone and catch Samsung AM promoting its oil futures ETF recently launched in the SAR: