So, the all important question is "What happens next?".
Using the methodology within BTCH we would expect the following to unfold.
A political quantum shift to the right
One of the main takeaways from the referendum was that 52% of the population voted against all of the political parties. This is a massive show of no confidence in Britain's political leaders and demands a quantum change by future politicians in the way they lead and relate to the electorate. As part of the shift in UK politics, there will be a significant move to the right in all of the key parties with the caveat that policies are beneficial to all strata of society.
Corbyn with support from the unions represented a misinformed reaction to the Labour Party's failure at the last election. The reality of that failure has been drummed home in the referendum, coupled with the appalling leadership qualities of Corbyn. The ensuing leadership challenge will inevitably be successful and most likely break hold of the unions over the Labour Party. The result will be that Labour will move back to the centre, as it was once positioned under Blair.
Meanwhile, in the Conservative Party while the Cameron camp will inevitably try to block Boris, they will be unsuccessful, and consequently, Boris will be the next PM sooner than people expect. Any other result could foment a constitutional crisis, unless an ardent leaver becomes the next PM. After all, how else could the will of the people be enacted? The sooner Boris is installed as PM, the more reassured the nation and the world will be. Conversely, if this does not take place, then Britain risks going to the brink of a constitutional crisis, before core British democratic values reassert themselves. Either way, the inevitable consequence will be a shift to the right by the Conservative Party who will once more seek to follow the old Thatcherite values of a small government, encouraging entrepreneurship, low taxes and a strong defence and foreign policy. But their immediate task will be to pursue a swift separation from the EU by creating bilateral trade agreements. To achieve this, the Conservatives may well bring in force an Act of Parliament that would short-circuit any Lisbon treaty negotiations.
Meanwhile, UKIP is a dead man walking, if the Conservatives move to the right. This protest party that to its great credit has been successful in managing to catalyse Britain’s escape from the EU, will have very little to offer. Their only response will be to move further to the right into territory that to the majority of voters will be perceived as too extreme.
The so-called cataclysmic moves in markets are by the standards of past events currently relatively small. However, its seems that the press has been keen to hype up the consequences. Long term, we have argued that we are in a deflationary cycle that will not end until 2018 and asset prices have a long drop in front of them. The biggest risk is a Western debt crisis that has started in Italy causing a domino effect that hits Spain and France and could ultimately reach America. However, the good news is that Brexit has made the UK a haven so that the low price of the pound should be viewed as a buying opportunity (now @1.34) before, during the months ahead, Britain's currency will appreciate considerably.
Brexit was the death knell for the EU in its current form. Whilst its leaders are concerned, they do not appreciate that the first step in the deconstruction of the EU is underway. The more unreasonable the EU is to Britain, the quicker will be the unraveling. However, the real energy of the collapse will come from the immigration pressure and the impending debt crisis in Italy that will ultimately prove unstoppable to the European Central Bank. Thus, it will spread to Spain and Italy, and social unrest will sadly follow.
Britain will in the years ahead build trading relationships outside the EU and once more become a global maritime trading nation. This will encourage the expansion of the Royal Navy and indeed the Armed Services as a whole.