UK votes to leave EU
26th June 2016
The result ended with just under 52% of people who voted to leave against 48% for remain. The vote is only the beginning and despite inevitable contingency, planning the detail of our exit will be determined in the hours, days and months to come.
It was never going to be an easy decision and we hope that the polarised positions of both camps can be forgotten in time to ensure the future stability and prosperity of the United Kingdom.
The financial markets have already reacted to the result and you will no doubt be reading and hearing about these movements for some time to come in the media. At the time of writing, a statement from the Bank of England that they are prepared to support the economy financially have softened the fall which is happening in the UK stock market and Sterling.
In the immediate aftermath of last night’s vote, we appreciate this may have caused fear and anxiety for some. If you are concerned at all about how you may personally be affected, please do speak to your Old Mill adviser.
In our professional experience, your immediate reaction should not be to panic or make any rash decisions. We would urge you to focus on longer term trends and not get caught up in short term market movements, hysteria or speculation. As we have noted previously, it was always likely that if we did vote to leave the EU there was going to be a period of political, market and economic uncertainty.
Our view remains unaltered as before the result was known and some of the key risks are shown below.
Risk 1: Greater volatility in the UK (and other) equity market
We are already seeing increased volatility in the UK equity market as it tries to come to terms with what exit means for the UK economy and the impact on the wider global economy.
Risk 2: A fall in Sterling against other currencies
Much has been made of a fall in Sterling against other global currencies, which has already been reflected to some degree in exchange rate movements since the start of 2016.
Looked at in isolation, these may appear to be significant risks. Yet as part of a well-diversified and sensibly constructed portfolio, their impact can be greatly reduced.
Sticking to your strategy
At times like this, it is easy to become overly concerned about near-term events, such as the unfolding implication of this referendum. Your life as an investor will inevitably be punctuated by an ongoing series of near-term events, making life continually uncomfortable, unless you view them in the context of the longer term.
Below we reiterate a few thoughts that might be helpful to remember:
- The value of any investments you have simply tells you how much money you would have if you liquidated your portfolio today, which you should have no intention of doing. You only make actual losses if you sell assets. If you don’t sell them, they remain in your portfolio to deliver future returns.
- Your investments should have a well-thought-out structure – that has been designed to provide you with the best chance of a favourable long-term investment experience. Stick with it.
- Some assets will be doing well at times and others less so. No-one knows which asset(s) it will be at any point in time. Markets work well enough to make jumping from one asset class to another a dangerous strategy akin to gambling.
- We cannot control what markets do, nor can fund managers. Markets will do what they do.
But we do not make light of this situation and please do not hesitate to contact us if you have any concerns at all.