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00:00JOINING US NOW IS LARRY HATHAWAY . THE CHIEF ECONOMIST. THANK YOU FOR TAKING TIME TO JOIN US. AS YOU WATCH THE MARKET ACTION AND THINK ABOUT WHAT IT POINTS TO, WHAT ARE THE TAKEAWAYS FROM TRADING IN EUROPE? WE ARE NOT FAR FROM WRAPPING UP. WHAT HAS TODAY TAUGHT US ABOUT WHAT HAPPENS NEXT? LARRY: WORST AND MOST IMPORTANTLY, IT TAUGHT US THAT THIS WAS UNEXPECTED. IN THE PRECEDING 4 TRADING DAYS MARKETS HAVE MOVED HIGHER IN ANTICIPATION OF A REMAIN OUTCOME. LEAVE HAS BEEN A SETBACK FOR MARKETS. AFTER THE INITIAL SELLOFF WE SAW BALANCE AND STABILITY. THIS IS ABOUT REPOSITIONING AND RISK MANAGEMENT WITHIN PORTFOLIOS. THE LEVEL OF UNCERTAINTY ELEVATED WILL REMAIN SO. THERE WILL BE AN OBSTACLE TO GENUINE FUNDAMENTAL SPACE INVESTING IN THIS ENVIRONMENT. THEREFORE, THE HALLMARK OF THE FUTURE IS LIKELY TO BE VOLATILITY AND UNCERTAINTY. JONATHAN: SOMETHING YOU SAID, THE WAY MARKETS WERE PRICED INTO THE DECISION. THE POUND IS 137.29. IT DID HAVE 138 IN LATE FEBRUARY AND EARLY MARCH. I KNOW THAT IT IS A 30-YEAR LEVEL OVERALL AND LOOKS SCARY IN THE INTRADAY MOVE, BUT ON THE FOOTSIE IN THE WEEK, IT IS HIGHER EVEN WITH THE AGGRESSIVE MOVE LOWER. CAN YOU TALK ABOUT THE INTRADAY MOVE AND THE DRAMA THAT BRINGS. ON THE MARKET WAS POSITIONED GOING INTO THE DECISION. LARRY: JUST BEFORE WE BEGIN TO GET THE RESULTS, THE POUND WAS FLIRTING WITH 150 AS THE FIRST RESULTS CAME IN. IT FELT LIKE A STONE AND WE SAW THOSE AROUND 133. THAT IS BEFORE WE SAW THE RECOVERY TO THE LEVELS THAT PREVAIL. THE MESSAGE BEHIND THAT IS THE MARKET WAS UNPREPARED FOR THE OUTCOME. BEYOND THAT, A SECOND MESSAGE TO HEED. THAT THE POUND OWES ITS STABILITY TO CAPITAL INFLOWS. THE U.K. RUNS THE WORLD CLASS DEFICIT THAT REQUIRE SPENDING CAPITAL INFLOWS. IN AN ENVIRONMENT OF UNCERTAINTY UNLEASHED BY THE BREXIT IT IS QUESTIONABLE THAT THAT MONEY WILL CONTINUE TO COME IN AT A PACE THAT SUPPORTS THE POUND AT THESE LEVELS. YOU ARE RIGHT. WE'RE BACK TO LEVELS THAT WE SAW EARLIER THIS YEAR. THIS IS JUST THE FIRST CHAPTER IN WHAT IS LIKELY TO BE AN UNFOLDING STORY. THE PROSPECTS FOR THE POUND DON'T LOOK THAT GREAT. GUY: GIVE US AN IDEA OF HOW MUCH LOWER WE NEED TO FALL TO MAKE THE TWO SIDES OF THE LEDGER WORK . WHERE DOES THE POUND NEED TO BE? LARRY: IF YOU RECALL, AS PEOPLE WERE CONSIDERING THE BREXIT OUTCOME IN THE WEEKS RUNNING UP TO THE REFERENDUM, THERE WERE A NUMBER OF VIEWS THAT SUGGESTED THAT THE POUND COULD FALL TO 125 AND EVEN BELOW. I REALLY DON'T KNOW IN THE NEAR TERM EXACTLY WHAT DYNAMIC WILL UNFOLD. I THINK THOSE ARE LEVELS THAT WE HAVE TO KEEP IN MIND. I DON'T THINK THAT WE SHOULD LOOK AT SHORT-TERM MOVEMENTS THAT ARE UNFOLDING TODAY AND TAKE THEM AS REFLECTION OF FUNDAMENTAL BASED STRATEGY. THIS IS ABOUT NEAR-TERM RISK MANAGEMENT. WHEN PARTICIPANTS COME BACK TO THE MARKET NEXT WEEK AND IN THE ENSUING WEEKS AND ASSESS THE FALLOUT OF THE BREXIT FOR DOMESTIC POLITICS IN THE U.K.,

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Lessons Learned From Post-Brexit Markets

Larry Hatheway, head of multi-asset portfolio solutions at GAM Holding, examines global market reactions to the U.K.'s decision to leave the European Union. He speaks on "Bloomberg ‹GO›." (Source: Bloomberg)

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