When the British people voted last Thursday to exit the European Union, their Prime Minister promptly resigned, and the value of the pound fell from $1.47 to $1.34 per U.S. dollar, its lowest point in more than 30 years. Stock prices fell, but they're on their way back up now, and the Dow Jones Industrial Average closed the second quarter on a high note.
All this Brexit brouhaha seems remote, but it could have some impact on U.S. GDP and your personal finances:
- Your stock portfolio and 401(k) balances probably took a dive, but they could recover soon if you're not heavily invested in the Euro.
- U.S. Treasury bonds could increase in value, as will the price of gold and precious metals.
- The U.S. dollar has been strong, relative to other currencies, and it will be even stronger, at least for a while.
- Imported goods and foreign travel will be cheaper, but U.S. exports will decline.
- Mortgage rates could go even lower, but that usually puts upward pressure on home prices.
What about freight transportation, over here on this side of the pond? Well, U.S. trade with the U.K. makes up only 5% of our economy, so the direct impact is not huge. But there could be a lot of indirect effects. A few examples:
- Oil Prices Fall, Freight Rates May Follow: Crude oil prices fell 5% on the global market in one day, so oil is back under $50 per barrel again. Diesel prices could drop again, but prices usually rise in the summer, so maybe not. Either way, trucking costs and revenues are both influenced by diesel prices.
- Consumer Spending Declines, So Does Freight Volume: Consumer spending is critical to U.S. economic health, and it generates freight. Americans who looked at their investment portfolios during the past week could feel iffy about spending any money right now. Manufacturers will adjust their production volume accordingly.
- Durable Goods Orders Increase: Consumer confidence might be down, but so are interest rates. People who are buying large items, such as cars or appliances, might go ahead and commit while interest rates on financing make those payments more affordable.