The market is tanking today, which isn’t really surprising. For some reason, market participants weren’t already positioned with a bearish bias going into the Brexit vote, as the immediate volatility following the vote is quite revealing. Perhaps investors weren’t anticipating Brexit to “actually” occur. Perhaps, it was just a hypothetical scenario that investors discarded. I find it quite surprising that the market is responding so negatively to Britain’s exit from the EU given the forewarning and mounting political support going into the event. However, with equities already overbought going into the vote, it marks a near-term inflection point for sentiment rather than broad structural weakness for broad based global equities. Notwithstanding, the risks are very real for the EU and UK, given the sudden strength of currencies against the GBP, which marks a turning point for the weak dollar trade over here in the United States. Here’s what Morgan Stanley released in a note a couple hours ago. The reference comments on GDP pertain to the United States:With the impact estimated to begin in 3Q16, average annual GDP growth would be little changed this year in both a medium and high stress (acrimonious) scenario. In 2017, average annual GDP growth would be 0.3pp lower in the medium stress scenario, but reflecting impacts that deepen over the course of the year, the 4Q/4Q impact is estimated to be roughly twice that (0.6pp).Bank of America Merrill Lynch also released a report (just hours ago) on the likely impact to U.S. GDP as well. Here’s what they stated:The decision for the UK to exit the European Union is another in a long string of confidence shocks, hitting an already vulnerable US and global economy. We are therefore making the following changes to our forecast, but highlight the uncertainties with these estimates: Reducing real GDP growth by an average of 0.2pp over the next 6 quarters. This leaves 2016 annual growth of 1.8% but slices 0.2pp from growth next year, bringing it also to 1.8%On a broad basis, the U.S. economy isn’t “too” structurally affected given the sensitivity scenarios I have reviewed. However, with the USD exhibiting strength across the global basket, it does negatively impact internationally exposed S&P 500 constituents. So, even with the economists shrugging at the U.S. GDP impact (roughly) 0.2% to 0.3%impact, the buy side desks still have to respond to the 2%+ move in the entire dollar index, as it negatively impacts international sales comps by -2% y/y for equities, which internationally exposed companies composes more than 60% of the S&P 500 constituents.While the market already anticipated Brexit, investors couldn’t anticipate the degree of volatility following the black swan event. In other words, equities directly responded to currency volatility more than macro-specific headwinds. As such, it goes back to efficient market hypothesis whereby repricing of equities in a scenario of currency volatility would occur netting out all arbitrage opportunities in immediate response to a major market event. The weakness in equity prices will likely abate once the foreign exchange returns to a tighter trading range across all currency pairs. As it currently stands both the Euro and GBP are starting to pivot higher with a couple hundred pips supporting the bounce. I don’t believe it’s a dead cat bounce, as the GBP/USD has already lopped off a thousand pips, so reversion to mean and further tightening of the trading range remains highly probable. The worst is probably behind us, and with U.S. equities declining by 3% across S&P 500 and DJIA, I believe U.S. equities demonstrated better than expected resiliency to Brexit.So, I feel like investors should wait a couple more days before getting back into stocks, but should be opportunistic buyers here. Being selective will definitely help, and finding great short opportunities could limit portfolio volatility with a re-balancing towards a 30% short 70% long distribution. Operate like a hedge fund, and don’t position yourself long 100% equities.