SPONSORED EDITORIAL

Will we, wont we? Nobody - not the politicians, traders, corporations or the electorate - really knows what the outcome of the referendum will be and its longer term impact on the UK and the FTSE 100.

It is such a unique event, that it is almost impossible to second guess.

An exit would certainly be a noteworthy event, but is extremely hard to put any measures around.

The FTSE 100 is made up of global corporations, so it is possible an exit would have little effect; especially knowing that markets like Japan, China and the US are just as important (if not more so) to the health of the UK economy.

It would also allow deeper access to old but up-and-coming markets to trade with, such as the Commonwealth.

"If you’re a technical analyst, then you’ll know we are currently in a ‘death cross’ situation, which last happened in 2008 when the FTSE 100 fell nearly 50% from its peak..."

A greater impact may be felt by stocks on the wider FTSE 250/350 indices which are more UK and Eurozone centric. The financial markets are an efficient mechanism, in which prices reflect the anticipation of a risky event.

So, are we already seeing the outcome being played out in the FTSE 100?

If we are, then it’s not looking too good. If you’re a technical analyst, then you’ll know we are currently in a ‘death cross’ situation, which last happened in 2008 when the FTSE 100 fell nearly 50% from its peak.

We’re currently down just over 20% from recent highs, which would mean a similar fall; taking the FTSE 100 to the mid 3500s from today’s current levels at 6100.

What is not talked about so greatly, is the global contagion effect such an event may have or trigger.

The EU is currently in dire straits, both politically and economically.

The UK economy leaving would only damage these markets further, possibly leading to further exits from other member states.

With the US and Chinese economies also struggling, this event may provide the stimulus to drive global markets down much further south.

As the referendum date looms closer, the markets will be increasingly unpredictable.

If Brexit happens, we are likely to see further dramatic volatility in the short term.

However, rest assured that once the dust settles, history shows us that the FTSE 100 will return to normal levels following this unique event risk situation.

To learn more about financial markets, visit the website of Canterbury-based THE STOP HUNTER, at thestophunter.co.uk.