Here’s why the ASX 200 has been smashed today

Local shares have been hammered today as investors turn their attention towards a number of upcoming events which could have an impact on share prices around the world.

As it stands, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has dropped 1.7% or 88 points to 5224 points.

The broader ALL ORDINARIES (Index: ^AXAO) (ASX: XAO), which comprises a number of smaller companies in addition to the regular blue chips, is also down 1.6% to 5305 points.

One of the biggest uncertainties facing equity markets right now is Britain’s upcoming referendum vote to stay or leave the European Union. Dubbed ‘Brexit’, some parties argue that leaving the European Union would eliminate a heavy drag on Britain’s economy, while others suggest leaving would only separate Britain from its largest trade market, potentially harming its future growth prospects.

The vote will be held on 23 June 2016. While many still believe it is more likely that Britain will vote to stay, it is really too close to call either way. As such, shares could remain shaky until then.

Meanwhile in the United States, there is still a chance that the Federal Reserve will hike interest rates in the near future – potentially as soon as July. Investors have responded both positively and negatively to this prospect in the recent past, so the uncertainty of what to expect is clear.

The banks are leading the market’s plunge today. Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), which are the two largest banks by market value, have dropped 2.1% and 2.3% respectively, while Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB) are down 2.5% each.

Meanwhile, BHP Billiton Limited (ASX: BHP) and Santos Ltd (ASX: STO) shares have lost 2.2% and 5%, while Telstra Corporation Ltd (ASX: TLS) shares are down 1.7%.

Indeed, it can be tough to remain calm during times of heightened uncertainty, but investors need to remind themselves that volatility is a perfectly normal aspect of investing. As Benjamin Graham once said, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

The volatility will pass, and those who remain calm (and those who buy quality shares at beaten down prices) will likely be the ones left smiling in the end.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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