We awake to a brand new world. A world with many uncertainties, but not one that the experts hadn’t planned for.
We, as Financial Planners therefore felt it important to keep you informed of the likely impact this may have for you, but also reassure you about the reality of the situation.
Initial market reaction has been negative after sentiment in the days preceding the referendum itself seemed to have shifted to favour a Remain vote. The FTSE did however recover some early losses to close the day at the level seen only last week, at a favourable 6138.
That said, those of you that have undertaken a review of your portfolio during the last 12 months will be aware that many portfolios have already been defensively positioned throughout the year and in many cases, equity weights have been reduced over the past 18 months.
This was evidenced through the oil price crisis in 2015, where the FTSE 100 fell almost 20%, yet average moderate risk portfolios only fell by circa 4%.
Although the economic impact for the UK leaving the EU is effectively unknown, it is expected that the impact will be relatively limited in the grand scheme of things. In the short term, it does not change investment fundamentals significantly and it is seen as wrong to pre-judge the longer term impacts of the exit. While equity markets are often prey to short term swings on sentiment, long-term investment returns are driven by these fundamentals.
One of the most well-known and respected fund managers, Neil Woodford, has today commented; “Markets are clearly shocked by the decision but, in our view, it is not as negative a development as the market’s initial reaction appears to imply.”
In the longer term, it is the view that the trajectory of the UK economy, and – more importantly – the world economy, will not be influenced significantly by today’s outcome. Consequently, many portfolio strategies will not change. They were designed for a challenging world, characterised by low growth, deflation, debt problems, weak productivity and troubling demographics. Despite these headwinds, confidence that portfolios will deliver the returns targeted over the time horizon that we continue to focus on.
We are committed to retaining a long term view and investing across a balance of assets, given that it is proven to be the best way of minimising the impact of events like today.
At times like this, we must remember that we are ‘investing’ and simply not ‘speculating’ for clients, which is a completely different issue whatsoever.
I do hope this helps with your understanding of how the result may affect you and your holdings, however, should you wish to discuss this, or any financial matters call Active on Tel: 01642 765957, or email info@activefp.co.uk
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DISCLOSURE
The content of this communication does not constitute individual advice.
Most investments should be considered as a medium to long-term commitment, meaning you should be prepared to hold them for at least five years.
All investments carry some risk. The value of investments (and any income received from them) can fall as well as rise and you may not get back what you invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets.
