Stock market performance often reflects the expectations and outlook of future returns with particularly bad news having an impact on the stock market. The withdrawal of the United Kingdom from the EU is one that sparked ripple effects from an economic, social, and political perspective. The outcome of the referendum was indeed a shock for many and brought about rapid changes particularly the stock market that makes it an interesting area of study. With globalization taking center stage in improving stock market operations, global events such as the Brexit carry the potential to affect the market on a global scale especially where companies have their operations distributed all over the world. The paper analyzes the impact of Brexit on stock performance with a particular focus on Adidas, Bank of America and Consolidated Edison Inc. It aims to explore some of the effects of stock price, operations and finances triggered by Brexit and the resulting effects.
Adidas is a company appreciated worldwide for producing sportswear and apparel. It aims to be the leader in the sports goods industry. In 2016, the company experienced tremendous growth despite the ripple effect brought about by Brexit through the launch of its new strategy, ‘creating the new’, (Adidas, 2016). The strategy was instrumental as it helped steer adidas belief that through sports, it is possible to change lives. Bank of America boasts in being a multinational financial service provider while Consolidated Edison is a respected energy company.
Delegate your assignment to our experts and they will do the rest.
Concerning stock performance, adidas shares outperformed in international stock markets, attributable to the new strategy it had. The Brexit represented a political global event that had an effect on the stock market. According to a report by Raddant (2016), prior to the referendum, the stock market was in upward movement and it is after the polls that stock prices dropped by around 10 percent. At the time various companies experienced a decline in their stock particularly investment based agencies. According to Browning of Bank of America Corporation, the Brexit outcome and the U.S election increased investor opportunities, (Lynch, 2016). As one of the leading financial providers in various services, more investors have opportunities to invest in various financial services such as wealth and asset management. However, at the time the instability in the market discouraged them from doing so, (Lynch, 2016). The referendum presented positive effects with Consolidated Edison experiencing a boost in their stock performance as energy-based sectors recorded a peak in stock performance.
Stock Price
Concerning stock price, the stock market during the referendum was unfavorable characterized by volatility. More often than not financial markets find support from the investor’s perception of the future and as such, investors are unwilling to invest in an unstable environment. During the time as explained by Raddant (2016), stock from the industrial sector recovered fast as opposed to those from the financial one such as Bank of America. This explains why Consolidated Edison experienced a rise in their stock price with the environment favoring their performance. The Brexit vote produced a ripple effect in other countries such as Germany, France, Spain, and Italy with stock prices declining sharply but returned to their previous levels within three weeks. For Adidas, the brand strategy aiming to advertise the new products and capitalizing on brand innovation helped the company steer through the change.
Operations and Financial Sector
Being in the manufacturing industry, operations represent a critical aspect of growth in Adidas, (Adidas, 2016). The positive effects of better pricing and product mix help in lowering the operational costs. With Adidas relying on a market segment perspective to fulfill its core operations, the stock market relies on the global operations to experience growth, (Fidelity International, 2016). In an evaluation of the effects of Brexit on the financial services sector, the Sterling had its biggest drop, equities fell and investors lost confidence resulting into a decline in the stocks, (Mackenzie, 2016). Bank of America, in an attempt to recover from future political events reveals the growing need to invest in energy following agreement by OPEC to cut down on crude oil production, (Lynch, 2016).Consolidated Edison being in the energy sector, was on the winning side with the perception of the sector being of stability encouraging investors to invest.
Globalization has ad continues to be an effective tool in stock performance. Companies such as adidas with global operations experience growth. With political events playing a role in affecting performances, companies have to anticipate events and re-event operations within the stock market so that their operations do not stumble within an unstable environment.
References
Adidas. (2016). Adidas Annual Report 2016. Print.
Fidelity International. (2016). what would Brexit mean for markets? Print.
Lynch, Merill. (2016). 2017 Market Outlook: BofA Merrill Lynch Global Research Calls Heads or Tailwinds as Markets Swing on Policy Shifts. Web. Retrieved from www.newsroom.bankofamerica.com on 24th Jun 2017.
Mackenzie. (2016). How global markets are reacting to UK’s Brexit vote. Financial Times. Web. Retrieved from https://www.ft.com on 23rd Jun 2017.
Raddant, Mathias. (2016). Kiel Policy Brief: The Response of European Stock Markets to the Brexit. Print.
