Hours after the UK voted to quit the European Union, investors put stocks on notice.
Major US indexes had their worst day since last August.
The vote was a shock and investors woke up to not only the surprise Brexit but to reeling global markets from European stocks to a tumbling British pound (R.I.P.)
What does this mean for you?
Don’t expect much of a return this year, not that you should have before this.
Both the Dow Jones Industrial Average and S&P 500 each wiped out their meager gains for the year through today (June 24). The S&P 500 dropped 3.6% (that’s a lot.) US stocks have struggled throughout 2016, and have really been having a tough time since global growth forecasts have grown ever more grim over the past year. Add to that warnings far and wide that Brexit would have negative implications for the economy and you’ve got a selloff on your hands.
Stocks have rallied from 2016 lows they hit in the depths of the oil bust, but there wasn’t much reason for that rebound either. Corporate profits for S&P 500 companies fell 6.6% in the first three months of the year from the same period of 2015, according to FactSet. That was the fourth-consecutive quarterly decline. And analysts expect another year-over-year-drop of 5.3% for the second quarter. (Bulls may say things are improving.)
There were some standouts today. Airlines, particularly UK and European based airlines are expected to have a particularly rough patch thanks to the vote, which could force a renegotiation of air agreements that have allowed low-cost carriers to flourish. Investors seemed to agree, as most of them, US and European alike, plunged today. Bank stocks also took a dive, as investors fretted about economic growth and years more of low interest rates, which hurt bank profits.
Some markets did well, like gold, which investors often turn to in times of strife because it’s considered a safe haven store of value.
Ilya Feygin, managing director at brokerage WallachBeth says: “safety is the name of the game.”