Drop in stock prices after Brexit can be a buying opportunity

On 23 June, a referendum decides UK’s continued membership of the EU.
Some analysts predict that European stocks may drop as much as 15-20% if UK exits the EU. However, Sparinvests Chief Strategist David Bakkegaard Karsbøl finds it hard to see what would cause such a drastic development, besides the fact that the market always contains a degree of volatility that investors have to accept as a fundamental condition.

Consequently, he states, such a reaction would be excessive and can be seen as a buying opportunity like the one we saw at the beginning of 2016. One of the reasons that he does not share other analysts’ pessimistic views is that he does not expect the earnings of European companies to be much affected by a British EU exit.

Whatever the outcome of the British referendum, however, it is unlikely that Britain could or should withdraw from the EU within at least two years of the vote, as there are too many and too complex problems to be solved before a final withdrawal.

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