Hi everybody Please explain to me why the british pound will decrease in value w

Question

Hi everybody
Please explain to me why the british pound will decrease in value with the perspective that Britain will get out of eurozone, and why this perspective makes the stock market so scary and begin to switch from equity to bond. Thank you. Hi everybody
Please explain to me why the british pound will decrease in value with the perspective that Britain will get out of eurozone, and why this perspective makes the stock market so scary and begin to switch from equity to bond. Thank you.
Please explain to me why the british pound will decrease in value with the perspective that Britain will get out of eurozone, and why this perspective makes the stock market so scary and begin to switch from equity to bond. Thank you.

Explanation / Answer

Explanation why the British pound will decrease in value with the perspective that Britain will get out of Eurozone

In case taking overseas holidays will find their trips more expensive. There are now fewer euros or dollars for your pounds. The cost of anything that is imported rises when sterling falls. So if the fall in the pound persists, it could be reflected in pricier petrol and in a rise in the cost of some foods and electronic goods. British expats will also suffer from a weaker pound. The hundreds of thousands of Britons living in Spain and France who depend on salaries or pensions paid in sterling will see their purchasing power fall in their adopted nations.

Exporters, the drop in sterling makes their goods cheaper overseas and could help lift flagging demand. Manufacturers had been complaining that a relatively strong pound was hampering their competitiveness and contributing to a slowdown in the factory sector. A weaker pound is bad news for those importing raw materials such as metals. Their costs go up when sterling falls. Inflators and other economic indicators will likely not carry as much weight, when it comes to the value of the pound, as the major factor in the back of everyone’s mind will be whether or not the UK will still be an EU country at the end of the summer,” he says.

They fear that a vote to leave the EU could hurt investment in the UK, dampen exports and thereby hit overall economic growth. The agency says that in the event of a Britain voting to leave the EU it will consider assigning a negative outlook to that rating, compared with a stable outlook now. Such an outlook would imply a greater chance of downgrading that rating in the future. Rival agency Fitch warns that leaving the EU could bring both short-term disruption and long-term risks for the UK.

The negotiations and uncertainty over UK firms’ future access to EU markets following a vote to leave in the upcoming referendum on EU membership would weigh on confidence and delay investment decisions, the agency says in an update. This would have a short-term economic cost, although the precise impact would be highly uncertain.

Prospective makes the stock market so scary and begin to switch from equity to bonds

All financial advisers you will ever talk to and every investment article that addresses portfolio diversification will tell you to put some of your money into stocks and some of your money into bonds.

The reason: stocks and bonds typically don’t move in the same direction, when stocks go up, bonds usually go down, and when stocks go down, bonds usually go up and investing in both typically provides protection for your portfolio

Mostly stocks and bonds typically move in opposite directions because they are fighting for the same money from investors.

When investors use their money to buy stocks, they have that much less with which to buy bonds. Conversely, when investors use their money to buy bonds, they have that much less with which to buy stocks.

Investors will also sell bonds to raise money to buy stocks or sell stocks to raise money to buy bonds. When this happens, the prices of both asset classes are affected.

Here’s how it works:

Diversifying your account by investing in both stocks and bonds provides protection because you can offset some, or all, of your losses in one investment with the gains in the other investment. If your stock holdings lose value because stock prices are going down, your bond holdings may offset those losses if bond prices are going up. If your bond holdings lose value because bond prices are going down, your stock holdings may offset those losses if stock prices are going up.

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