What's going on?

Odds of a vote in favor of a British exit from the European Union (EU) (a.k.a. �Brexit�) continue to increase � and markets appear to be pretty concerned about it.

What does this mean?

While a potential Brexit is, of course, important to Britain in both the short- and long-term, global financial markets tend to focus on the short-term risks. As a vote in favor of a Brexit has become more likely, stocks in Europe and the UK have sold off sharply while government bonds have increased in price (as investors flock to, supposedly, safer investments). Brexit could negatively impact not only Britain�s economic growth but also that of Europe and, ultimately, the world. US stocks aren�t being hit as badly mainly because many investors feel that the impact on the US won�t be as significant.

Why should I care?

For markets: Some argue that the risks are greater for Europe than they are for Britain. One of investors� fears is that a Brexit would make it more likely that other countries will try to leave the EU too. Europe is already in a fragile position with relatively low growth, high debt and potential crises (like the Greece situation or problematic Italian banks). A Brexit will likely increase Europe�s already weakened foundations.

The bigger picture: The Brexit vote is one of a few big threats to �free trade.� The ability to trade goods and services across borders without incurring extra taxes (a.k.a. �free trade�) is generally thought to be good for the global economy and, especially, for companies� profits (and, therefore, stock prices). A Brexit would likely reduce trade with Europe. On the other side of the pond, Donald Trump is notably anti-free trade and Hillary Clinton has become less inclined to support it. The Trans Pacific Partnership, the biggest trade deal in 20 years, awaits approval (which is looking increasingly difficult). Markets are perhaps expressing some nervousness over these global threats to free trade.