Markets could be mostly over reacting. After all, a 900 point drop for an index like the Dow-Jones, cannot be rationally justified by a referendum for which the consequences could well be much milder than what is widely expected. However that is the key concept at play in the markets right now: expectation. Most investors hoped that Britain would choose to remain, and chose to trust the bookies who painted a picture of decreasing odds for Brexit. The fallout that ensued, was a direct result of expectation underpinned by speculation.
Odds are what they are, and anyone who invested based on the odds was gambling. Maybe it is time for investors to review their sources of information before they make decisions. Maybe it is time for investors to take a wild card event like Brexit seriously. But it is definitely time for the markets to return to a more rational behavior. It is time for all the forces involved to put Brexit in proportion and be ready to manage their expectations. Until then safe haven assets will keep on soaring while the rest of the markets will keep on drowning, multiplying the effect of a decision made by roughly 0.02% of the world population.
