While investors were in shock, open source signals such as Google trends often pointed to “Leave” predominating, illustrating expert and market biases.  Perhaps they should work on integrating these unconventional data streams better (sorry couldn’t help it).  The UK’s decision to exit from the EU is part of a larger global phenomenon that could have been understood better with open source, not just market, data.

The world is growing more complex. Information is moving faster. Humans have not evolved to retain or understand this mass output of (dis) information in any logical way. As a response, a retreat to simple explanations and self-censorship towards new ideas that might challenge one’s frame are ignored and become the norm. Populist decisions are made and embraced, oftentimes reactionary towards the establishment or elite. Multi-national corporations and elites will need to step outside of their bubble and take note of nationalist, albeit sometimes isolationist, such as Donald Trump, Bernie Sanders, President Erdogan of Turkey, Marie Le Pen’s Front National of France, Boris Johnson – Former Mayor of London and Brexit backer (good chance he takes David Cameron’s place), Germany’s AFD and the 5-star movement in Italy gain in both popularity and power.

In addition to the more media coverage, more people were associated with the leave campaign, which is an advantage. During a political campaign, choices and policy lines are anything but logical; they tend to fall on emotional lines, so institutional communications must have a noticeable figurehead, especially in the media age. It says something when the top people who are associated with Remain are Barak Obama, Janet Yellen, and Christine Lagarde. Note that David Cameron is more central with leave.  Nonetheless, the pleas by political outsiders and institutions such as the IMF and World Bank for the UK to remain in the EU potentially caused damage to the “Remain” campaign. UK voters did not want to hear from foreign political elites. This is illustrated by the connection and proximity of the “Obama Red Cluster” to the French right-wing Forest Green cluster (and the results) below. The “Brexit” could lend credence to the possibility of EU exit contagion. There are very real forces in France (led by the Front National) and Italy (led by the 5 Star Movement (who just won big in elections) that are driving hard for succession from the EU and or, potentially, the Eurozone.

Ramifications:

• Banks (especially European ones) are fleeing to the gold market, seeking shelter from volatility. While this is to be expected, dividend-based stocks and oil would also be attractive to those seeking stability.
• Thursday’s referendum sent global markets into turmoil. The pound plunged by a record, and the euro slid by the most since it was introduced in 1999. Historically, the British Pound reached an all-time high of 2.86 in December of 1957 and a record low of 1.05 in February of 1985.
• Don’t count on US interest rate hikes. Yellen has expressed concern about global volatility on multiple occasions. The Brexit just added to that. The Bank of England could follow the US Fed and drop interest rates on the GBP to account for market uncertainty.
• If aggressive, European uncertainty could allow US companies to gain on European competitors. Due to the somber mood within Europe, companies could be more conservative with investment, leaving them vulnerable.
• Alternatively, Brexit may trigger more aggressive U.S. or global expansion by European Companies while the ramifications of Brexit are further understood.
• The political takeaway is that the Remain campaign was relatively sterile, with no figurehead or clear policy issues directly related to the EU. This was reflected by the diversity in associated search terms related to the “Leave” campaign. In addition, Angela Merkel, not an EU leader such as European Commission President Jean-Claude Junker, was once again seen as the de facto voice of Europe.