BREXIT – the result! Is it as bad as you think?
The UK has voted to leave the European Union by a margin of 52% to 48%. Although opinion polls had narrowed during the final few weeks of the campaign, financial markets had been broadly positioned for ‘remain’ given the lead in bookmakers’ odds. The shock for financial markets has been particularly marked this morning given that the final poll on the day of the vote indicated a 4-6 point lead for ‘remain’.
The UK will certainly suffer an economic impact as businesses consider their options but trade with Europe will not stop. We now have two years to renegotiate our relationship with the EU trading bloc. It will be in both our interests to do so sensibly and, as an economic powerhouse, we will have a good bargaining hand. With an open economy, strong rule of law, a functioning democracy, good education, the historic benefit of having English as our mother tongue and fundamentally pro-business policies that reward hard work, over the medium term Britain will certainly prosper.
The vote to leave is likely to cause uncertainty over the short and medium term which could affect markets across the globe. Despite that, let’s remember that there are other factors impacting the global financial markets, such as the US election. The process to exit is ‘unchartered territory’ for the EU. Negotiations will begin soon, but it will take time to gain clarity on the detail and timeline of the process.
From time to time, stock markets go through periods of uncertainty. This could be down to some poor economic news or perhaps due to a political crisis. The sharp falls that can be experienced at such times is understandably unsettling for investors. They can even tempt some to change their long-term plan by selling their investments. However, stock market volatility does tend to be short lived. Therefore, most experts agree that investors are probably better off sitting tight through these unnerving periods.
We still stick with the mantra that you shouldn’t put all your eggs in one basket. Spreading investments across a range of asset classes and fund managers will diversify your holdings and could help to provide a less bumpy ride for you and your investments.
When stock markets become volatile, it is usually best to resist making changes to your long-term investment strategy. It is too easy to miss the best gains when you try to time the stock market. Time, not timing, is the key to investing.