How U.S. Stock ETFs Stack Up to Brexit Concerns

If the United Kingdom decides to break off from the European Union, stock exchange traded funds investors may be better off sticking to U.S. markets and related exchange traded funds.

"All you can do here in the United States, given the low level of interest rates, is go to the equities market," Dennis Gartman, publisher of The Gartman Letter, told CNBC. "Money has to go somewhere. It's finding its way to the equities market first and foremost."

The "leave" camp in the so-called Brexit referendum on June 23 has been gaining ground in recent weeks, triggering increased volatility in global markets, but recent polls show both sides in a tight race leading up to the vote.

Nevertheless, even if the Brexit vote causes a market downturn in the United Kingdom, U.S. companies may not be too largely affected.

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"According to FactSet Market Aggregates and FactSet Geographic Revenue Exposure data (based on the most recently reported fiscal year data for each company in the index), the aggregate revenue exposure of the S&P 500 to the United Kingdom is 2.9%," John Butters, Senior Earnings Analyst at FactSet, said in a note. "This is the third highest country-level revenue exposure for the index, trailing only the United States (68.8%) and China (4.9%)."

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U.S. equities markets have not been too fazed by the upcoming vote. Over the past week, the SPDR S&P 500 ETF (NYSEArca: SPY ) , iShares Core S&P 500 ETF (NYSEArca: IVV ) and Vanguard 500 Index (NYSEArca: VOO ) has increased 0.7%. The S&P 500 ETFs are also up 2.0% over the past month and 3.3% higher year-to-date.

Looking at the sector level, the energy sector has the largest exposure to U.K. markets, but only 6.4% of energy sector revenue comes out of the U.K. The Energy Select Sector SPDR (NYSEArca: XLE ) is up 2.4% over the past week.

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The materials sector shows a 3.7% revenue exposure to the U.K. The Materials Select Sector SPDR (NYSEArca: XLB ) is 1.5% higher over the past week.

U.S. stock investors have actually enjoyed a boost from the Brexit uncertainty. Since the U.K. announced a referendum vote on February 20, S&P 500 companies with more revenue exposure to the U .K. experienced higher average and median price increase relative to the benchmark S&P 500, according to FactSet data.

For more information on U.S. stocks, visit our S&P 500 category .


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article was provided by our partner Tom Lydon of

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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