Tuesday’s 109-point dumping on the S&P/ASX 200 index must have lots of you wondering just how bad this Brexit slug could be to the stock market? The simple answer is we don’t know but a lot of smarties got out over the past couple of weeks because they suspected there’d be some pre-vote anxiety.

This is the sort of stuff that hedge funds and other short sellers love — they pine for uncertainty — and right now they’ve got it in spades.

Economists call them “headwinds” but I call them pains in the butt. They come without clarity and they make it hard to play stocks confidently.

Let’s recap on these potential obstacles to stock market growth:

• Brexit
• The Fed’s eventual interest rate rise decision
• Negative interest rates and will they work?
• Chinese economic growth speculation?
• Chinese debt concerns?
• Will Japan ever grow?
• Can Europe benefit from quantitative easing?
• US economic growth
• Donald Trump!

Some of these, such as US economic growth, are much easier to call and I think activity in the States will keep on adding to confidence. The Fed overnight worried the market a little with six voting members of the Fed’s interest rate setting committee tipping only one rate rise this year but six others said there will be two. I hope the latter group is right, as it will confirm an improving US economy.

The Fed actually said this overnight: “The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up.”

I’m not sure about Japan but I do believe Europe is, and will keep, improving, albeit more slowly than I like. And China will keep defying the doomsday merchants but may not over-impress us by seeing its growth spike considerably.

However, Brexit and Trump, I don’t know. I take heart that the real experts on what the Poms think — Ladbrokes! — has the remain in the EU option at 2/1 on, which for our non-punters out there means if you put $2 on that option you will win $1. It’s the odds on favourite in this ‘two horse race’.

That said, polls are saying it could be a close run thing and that’s why stock markets are really jumpy. So, what’s the reasoning?

Imagine the Poms dump their EU membership, what happens? Answer, we don’t know and that uncertainty explains why stocks are falling now. But imagine the market reaction if it actually happens?

My guess is we’d see a big sell off of stocks worldwide, the US dollar would spike along with gold, our currency would fall along with commodity prices and the stock market. This would have negative business and consumer confidence effects and it would come before our July 2 election!

If the market reaction was sustained and very negative, it would lead to reduced investment, confidence slumps and threats to global economic growth, which can’t be great for stocks.

For political junkies, it might be good for Malcolm Turnbull with the Coalition likely to be seen as a safer pair of hands under a crisis situation but that’s only a guess.

This scenario is why I don’t want the Poms to leave the EU but if it happens it will be a buying opportunity at a much lower level of the stock market. I don’t think the Brexit drama would be long lasting but it would have a substantial negative effect until the smarties judge that the market reaction has been excessive.

Think about it. The Brexit would be bad for some companies but good for others, just as a lower pound or higher pound would be. Already negatively-exposed companies to the Brexit would be under selling pressure and this is the story driving the current sell off.

If no Brexit happens, then these companies would be strongly in the ‘buy’ zone and would lead a stock market recovery.

Ironically, after we coped with Brexit, along will come the Trump test for the stock market and Donald is not seen as a plus for Wall Street. He could be a real confidence crusher but I do believe he is such a business guy he won’t allow promises fed up to Americans to get in the way of economic and market success. He would hate to be remembered as a market mauler, so once again, a Trump presidency could be another buying opportunity.

I really love buying opportunities as regular readers can verify but I’d prefer to avoid the two described above. If Brexit can be averted and Hillary Clinton can trump Trump, then I see stocks grinding higher over the course of this year and into 2017, but that’s after a sell off and rebound.

Throw in good economic news out of the US and maybe some promising stuff from Europe, Japan and China, and we’ll be off to the races — stock price-wise.

Frankly, I don’t want to think about the alternative scenarios but if they happen I will be out there trying to pick the best re-entry point with that buying opportunity.

Finally, if the US economy surprises me on the downside in coming months, and I’m not expecting that, then you might see this optimist turn into a pessimist. At the moment, on what I am seeing, like Maggie Thatcher once advised: “I’m not for turning.” (Maggie actually said: “The lady’s not for turning,” but I needed to tweak that a tad, for obvious reasons.)

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