In the lead-up to Thursday's vote international markets have been relatively sanguine and UK ones surprisingly well behaved. Price swings have, on the whole, been caused by general attitudes to investments, today's shorthand 'risk on' and 'risk off' covering a raft of issues. Storm clouds have been hanging over the landscape for months: the outlook for the Chinese economy, deflation, unemployment hotspots, the health of the global banking sector, to be added to the UK vote and the chances that anti-EU sentiment spreads. Not forgetting the chance that Donald Trump might become the next US president - another scary prospect for out-of-touch elites.
From personal experience of trading the markets for over 30 years, knee-jerk reactions as soon as results are known are not a good idea. This is because markets are likely to be very thin, the most important players still tucked up in bed, and those of a nervous disposition likely to overreact. Wait to see the whites of their eyes and only then shoot. Cool heads and clear tactics are essential - and experience will probably shine through. Ignore screaming, alarmist headlines as tomorrow the sun will rise over all nations.
Foreign exchange has borne the brunt of Brexit speculation, sterling crosses against the Japanese yen and the Swiss franc (safe haven currencies) moving the most. Lots of expensive options to short the pound have been bought and the chance of expiring worthless is high as market makers try to protect their books.
The Bank of England might be tempted to tweak rates, but cuts when we are already at record lows have limited impact; on the other hand rate rises will shatter many strategies so the risk is totally asymmetrical. A recent poll shows 61 per cent cite this as influencing their referendum vote.
Banks, and to a lesser extent fund managers and the insurance sector, are likely to be most at risk. Weak already, having struggled for the best part of nine years, they may have to speed up the rate at which they have to shrink to fit. Note that their eurozone peers are, on the whole, in a pretty awful shape too.
So, with a lack of attractive options, we may have to turn to the 'Tina' trade: 'there is no alternative', which many see as being gold (physical, not ETFs). The technical picture here is mixed indeed, with this year's rally the best in ages but still a corrective bounce to the secular bear market that started in September 2011. Note that rallies in three other precious metals have not been as impressive and are still clearly retracements rather than the start of something new. Gold's price action over the past three months might be a broadening top suggesting a slide through to year-end with the psychological $1,000 acting as a magnet.
