What now for equities and commodities?

Friday most of us woke up to the surprising news that Great Britain will be leaving the EU. The news initially spurred panic in the markets with the USD making a significant jump, the sterling depreciating to its lowest level since the 90s, and the FTSE (European stocks) plummeting by more than 7 %. Additionally both the Brent and WTI oil prices settled down by 5 % for the day. As the day went by the markets calmed down and gained back some of its lost ground as investors realized that the UK exiting the EU was not the end of the world.

So what now for equities and commodities?

I expect next week to be volatile as the markets get used to the idea of the UK exiting the EU. This may be a decent buying opportunity for both equity and commodity investors. This is why:

• The UK makes up only 4 % of the world GDP

• The UK was never really a member of the EU in the first place. As a member the UK has its own central bank, its own currency and the UK has been given regulatory exemptions which other EU countries have not

• This is not a black swan event. The markets knew this could happen. This is not a Lehman 2008 type of situation

• The situation has given the FED an excuse not to rise interest rates, which will weaken the USD and boost equities and commodities in the median-term

Personally I started buying Friday and I implemented some NOK/USD currency hedging (as I have a lot of USD exposure). I also did something I am not supposed to do, day trading. I bought UK bank stocks and european auto stocks at the market opening which I sold a couple of hours later (some fun profit).

I believe the EU will get out of this as a stronger entity as it will have to make changes and listen to the voice of the people.

Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving any compensation for it.