The NYU Dispatch

Are things really that bad with Brexit?

One of the key things that life has taught us is that the sun will always rise again tomorrow. With that in mind, we thought we would look at the more optimistic side of life, away from the doom and gloom of Brexit. Although the decision on the 23rd June 2016 has certainly had an impact in some way, shape or form, it seems to be muted – for the moment at least.

Consequently, it’s a good idea to have a look to see what has actually happened over the past year.

The stock market is crashing

Well, not exactly. Yes, the FTSE 100 is down nearly 8% since this time last month, but that’s due to several reasons, the most important of which is that the American economy is booming. Stock market traders in the United States are essentially pricing a rise in interest rates, which means that the era of cheap credit may be at an end. It will depend on what the Federal Reserve does at its next meeting. The current prediction is that there will be three or four interest rate hikes in 2018.

Although we’re talking about America, what happens there affects world stock prices, which is why the FTSE has been affected. The only one that hasn’t seen significant fluctuations is the Nikkei 225, which is based in Tokyo. This is because there is virtually zero chance of the Japanese government raising interest rates there due to sluggish economic growth.

Okay, so isn’t currency recovering?

The pound is doing much better than it was this time last year, as it has gone from hovering around the 1.20 mark to breaking the 1.40 mark against the dollar. Essentially, a dollar used to be worth around 84p, whereas it is now worth around 70p to 72p, which indicates the pound is getting stronger.

The initial drop was caused by the decision to leave the EU, with traders being very jittery regarding the pound’s strength. However, confidence has gradually been restored, particularly now that it’s clear that we are not immediately going into recession. However, like the stock market, it’s likely to remain relatively volatile for some time yet.

What about housing?

Well, we can’t get away without mentioning housing. Estate agent Yopa made a prediction about housing at the beginning of last year. It aggregated various expert predictions to create an overall prediction of how the housing market would pan out in 2017. The average of these expert predictions was 1.2%.

While that prediction looked like it was going to hold true for the first couple of months, a surge during the summer took that prediction wildly off track. Although the housing market has regained a little sanity over the autumn and winter months, by December 2017 the overall rise had been 4.8%.

That’s seriously good value for money!

Housing is a good choice for gauging consumer confidence, as buying a house requires a substantial loan. Banks ensure that they will likely get this loan back by applying certain selection criteria that prevent people with poor credit and those without the ability to repay from getting a mortgage.

In addition, buying a house is a long-term commitment. Those with mortgages must therefore be confident that they can continue to pay off the mortgage and still be able to live comfortably. Essentially, house buying is based on confidence in a long-term supply of jobs and money.

So what about Brexit?

At this early stage it’s difficult to discern what exactly the impacts of Brexit have been, but what we do know is that the major drivers of our economy have remained relatively unaffected. It is worth remembering however that the United Kingdom is still in the European Union, and our trade agreements are still in place. When we formally leave, we will no longer have those protections, and the effects of Brexit will only then begin to make themselves known.

This article was contributed by fellow NYU students. If you would like to make a contribution to the NYU Dispatch, please email us.

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