Part of the reason for the magnitude of the moves is that the market had placed its bets firmly with the bookies; that while it would be tight, the result would be a decision to remain.
Indeed, as Matthew Beasley, head of global equities at Henderson Global Investors pointed out, given how hard currency and stock markets rallied over the past week, up until the polls closed “the investor shock today will be hard to digest. We estimate markets were pricing in around only a 20% chance of Leave.”
Kevin O’Nolan, portfolio manager at Fidelity International went even further saying markets had “almost completely priced in a vote to remain” and, as a result, further significant volatility is to be expected.
And, he added: “Elsewhere there has been a broad risk off move with other equity markets off sharply and US Treasuries 25bps lower. I expect UK Gilts yields to fall too although this may not happen in a straight line as investors sell UK assets.”
The risk off move was also seen in gold, which jumped 22% against sterling overnight. According to BullionVault, the move was the metal’s fastest ever move, leaping to new 3-year highs above £1000 per ounce. And, as head of research, Adrian Ash pointed out: “This is just the kind of crisis which gold helps savers and investors insure against. Gold offers certainty and security as stock markets and currencies sink, just as it did during the 2008 meltdown. The difference is that this shock was clearly signposted, and many private investors didn't wait for today's result to get prepared.”
That it was so clearly signposted, is perhaps the one good thing because market participants have had time not only to position themselves but also to think through how they might react, as Columbia Threadneedle’s Toby Nangle said: “Rarely are risk events so well diarised”.
And, while he admits it has not helped markets price the outcome, “it has helped central banks prepare contingency plans and we anticipate that they will be there to provide copious liquidity if required.”