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Brexit – An analysis in three acts

  • Act 1 (prelude): investors have long neglected the potential perils of a Brexit. As a logical consequence, fear mounted in the run-up to the referendum. The assassination of the British politician Joe Cox, however, ignited peoples status quo bias again. Until election eve, investors remained in denial. Therefore, the market was completely unprepared.
  • Act 2 (Brexit): the victory of the leave campaign caused investors to enter the behavioural stage of recognition abruptly. Over the next days, sentiment and uniform behavioural pattern dominate markets. Although, these behavioural traits will not leave a lasting impact.
  • Act 3 (outlook): while irrational exuberances should fade away over the coming days/weeks, the outcome of the Brexit referendum reveals structural interruptions for global markets. Such interruptions often built the basis for new, lasting market trends. It just depends on differentiation, in our opinion, the euro, US equities and German Bunds are to watch.

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