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Area analysts unfazed by Brexit
YOUNGSTOWN
As analysts around the world unleashed apocalyptic predictions Friday after Great Britain’s unprecedented decision to leave the European Union, economists and finance experts close to the Mahoning Valley offered a more-optimistic outlook.
Fallout from “Brexit,” as the country’s exit from the EU by way of referendum has been dubbed, is not expected to significantly impact the U.S. or local economy, experts said.
“The impact will be small, but the risk is there,” said Mekael Teshome, PNC Bank economist. “U.S. exports to the United Kingdom are fairly small. ... So even if the UK were to have a recession – and we’re not forecasting this – it wouldn’t really affect the U.S. a whole lot.”
The same goes for Northeast Ohio and Western Pennsylvania, he said, but economists in this region will be closely monitoring interest rates and the value of the dollar.
“We think it will prolong the Federal Reserve’s timetable for raising rates. Right now we’re thinking they probably won’t raise rates until December, at the earliest,” he said.
For consumers, that means the cost of borrowing money will remain low.
Another likely consequence is that the dollar’s value will go up.
“The dollar has been strong, and it’s been appreciating. It’s affected our exporters,” Teshome said. “Steel producers have especially been hit hard by that in this region.”
For travelers, however, a strong dollar – and the British pound’s plunge to historic lows Friday – could be a good thing.
Local travel agency Cruise Ahoy Inc. reported that Brexit’s monetary impact could spur heightened interest in trips to the UK, which already ranks among the company’s top European destinations.
“It should be a positive,” company manager Perry Hvizdak said. “The world is going to continue.”
Jason Bernat, vice president and investment adviser at American Financial Services, also offered a positive take on Brexit.
“We’re not worried here. There’s no way that the UK separating from the EU is going to drive the world’s largest economy into recession,” he said. “What you see now is just emotion.”
Though a swift 611-point stock market plunge Friday had some analysts concerned, Bernat wasn’t worried.
“There are a lot of companies that were betting against what happened, and now they’re trying to cover their positions,” he said.
The way he sees it, “For investors, this should be an exciting time because opportunities like this are rare. ... The market is going to fall, and you’re going to be able to buy stocks and bonds at cheaper prices.”
“As an investment firm, it’s a good time to make your clients money,” he said.
Teshome also was not alarmed by investors’ reaction Friday, saying they “for the most part have been taking it in stride.”
He cautioned that, despite the initial panic in the wake of the referendum results, much of Brexit’s economic impact will be drawn out over the two-year period during which the exit process will be negotiated.
“It’ll be a drawn-out process,” he said. “They have to negotiate. Within that, the range of possibilities is quite wide.”