A passing vote would weigh on broad Eurozone markets and related ETFs like the iShares MSCI EMU ETF (NYSEArca: EZU) and SPDR EURO STOXX 50 (NYSEArca: FEZ). Both EZU and FEZ cover Eurozone member states and exclude United Kingdom and Switzerland exposure. Year-to-date, EZU is flat while FEZ dipped 1.6%.


More aggressive currency traders can also target further weakness in the Eurozone through inverse ETF options if the vote passes. For instance, the ProShares Short Euro (NYSEArca: EUFX) is designed to provide 100% of the inverse, or opposite, return of the U.S. dollar price of the euro, on a daily basis and the ProShares UltraShort Euro (NYSEArca: EUO) provides 200% of the inverse return of the U.S. dollar price of the euro on a daily basis. The Market Vectors Double Short Euro ETN (NYSEArca: DRR) tracks the Double Short Euro Index, which also provides a -200% exposure to the euro.

U.K. markets are already feeling the pressure on the increased uncertainty. The iShares MSCI United Kingdom ETF’s (NYSEArca: EWU), the largest U.K. exchange traded fund listed in the U.S., is up 0.5% year-to-date. Although, the depressed pound sterling has helped currency-hedged options like the Deutsche X-Trackers MSCI United Kingdom Hedged Equity ETF (NYSEArca: DBUK) and the WisdomTree United Kingdom Hedged Equity Fund (NasdaqGM: DXPS), which rose 1.5% and 4.5%, respectively, year-to-date. While a Brexit vote would drag on the markets, investors may find some solace knowing that a depreciating GBP could help the currency-hedged ETFs outperform non-hedged options.

Related: Contrarian ETF Plays to Go Against the Grain

Investors can also hedge against the growing uncertainty with safe-haven bets. For instance, gold and related SPDR Gold Shares (NYSEArca: GLD) have been a go-to hedge during uncertain times. Billionaire investor George Soros, known as “the man who broke the Bank of England” for his multi-billion bet against the sterling, is also reportedly betting big on bearish investments, including gold.

U.S. Treasuries may also enjoy greater interest as a safe-haven play away from European assets. ETF investors may look to options like the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) for more long-duration exposure and iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF) for intermediate-term exposure. Furthermore, U.S. government bonds could see increased foreign demand as British investors may find U.S. assets, like Treasury bonds, a more attractive store of wealth since the GBP would likely depreciate against the U.S. dollar in the fallout.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.