The United Kingdom’s vote on June 23 to leave the European Union (a 52% to 48% final tally) was the biggest story of the day. The financial world has been scrambling in the wake of Brexit. The Miller Group’s CEO, Rudy Miller, a frequent guest, discusses the historic vote and what it will mean in the longer run in this report.
The short version of the event, Miller says, is that the citizens of the UK made the political decision to leave the EU. One aspect of the vote is that it was a move towards independence, a decision that the country should not be governed by the EU. In addition to the issue of political independence, there is a matter of economic independence. “The EU is telling you what hair dryer to buy.” Miller points out that the British people have a strong sense of independence, and they spoke out at the polls. Britain has had a long history with the EU, but it will be moving away.
The vote by British voters to leave the EU has caused Prime Minister David Cameron to resign. He will step down in October. Miller says that this causes some obvious uncertainty politically and in the financial world, as people wonder who will be the next prime minister and what the country’s political direction will be. Miller quotes a friend in London who said, “It’s a bloody mess on the market, but many people are celebrating their independence.”
As to what happens next, Miller explains that the Treaty of Lisbon contains Article 50 that provides a means for a country to leave the EU. The exit process would take at least two years, during which time the UK would continue to abide by all EU treaties and laws. During that time, Britain would negotiate the terms of its departure. Issues include financial regulations, trade arrangements, and the movement of British nationals through EU countries.
Miller notes that Britain’s decision to leave the EU might encourage similar referendums in other countries or efforts to get special accommodations from the EU. There will be elections soon in several European countries. There has also been talk that Scotland, where the citizens voted to stay in the EU, might seek independence from the UK so as to join the EU.
As to the financial effect of the Brexit vote, Miller believes it will be less than some are saying. “It’s not 2008, when we had our banks in a financial economic crisis.” The events of 2008 left banks in Europe and America stronger than they were. However, there will be many financial jobs that will move from London to other places because of Britain’s decision.
Miller does not believe that the drop in stock markets today is the first sign of a major recession. He sees it as “a flight to safety.” Miller points to the gold market, which reached a two-year high today. Treasury bonds are selling well. Notwithstanding some bumps on the road, Miller believes that the US economy is stronger than any of the European economies. He also believes that the Fed is glad it did not raise interest rates, and he believes there will be no further increases in 2016.
Rudy R. Miller is the Chairman, President, and Chief Executive Officer of The Miller Group as well as Miller Capital Corporation, an affiliated company The Miller Group, established in 1972. He was the Founder and Chairman of the Board of Miller Capital Markets, a FINRA member investment banking firm, from 2006 through 2012. He has over 35 years of executive-level experience owning, operating and advising corporations, from large NYSE listed public companies to emerging-growth private companies. His extensive operating and advisory experience provides clients with a comprehensive understanding into the challenges of successfully navigating a business through varying economic climates. The Legal Broadcast Network is a featured network of Sequence Media Group.