Posted on: 27 June 2016
The news that the UK has voted to leave the European Union has been a significant shock to the financial markets and UK Government institutions. All indications in advance of the EU Referendum were that there would be a Remain outcome with polling companies, bookmakers and global markets all anticipating a status quo vote.
The surprise outcome has affected the value of sterling, and to a lesser extent global equity markets. UK Government bonds have rallied, perhaps forecasting a downturn in UK economic activity. UK equity markets are international in nature and their fortunes depend far more on the wider global economy than just the domestic economy, and indeed many companies will benefit from significant overseas earnings. The Bank of England and other central banks are expected to play an active role in markets, to prevent a political crisis turning into a financial crisis.
We have been cautious on stock markets for some time and over the past two years have diversified portfolios, de-risking and moving away from sterling-based assets, in order to make them more defensive and better able to weather market volatility and mitigate risk. We have also recently added exposure to gold, especially as the risk of Brexit appeared to increase, an asset class which should perform well during periods of uncertainty.
The outcome does mean that financial markets will be highly volatile for the foreseeable future. With market volatility come opportunities. We are monitoring events closely and assessing the broader implications for markets and economies. With our long-term prudent investment philosophy and active management approach, we will seek out investment opportunities resulting from any short-term volatility and continuously review portfolio holdings and our asset allocation strategy.
Life after Brexit
In the coming days and weeks there will be a wide range of economic and political forecasts and projections – some of them will greatly exaggerate both the downside and upside risks and be played out extensively across the media. At Duncan Lawrie we will remain cautious and actively manage our portfolios as part of a long-term strategy.
All data has been compiled by Duncan Lawrie from sources believed to be reliable. Full details of sources are available on request.
The comments and figures in this document are generally applicable but you should always take specific advice to suit your individual circumstances before taking any action. Errors and omissions excepted.
The value of investments and income generated may fall as well as rise, and investors may not get back the amount invested. Past performance is not a reliable indicator of future results.