Brexit Referendum Result Investment View


Brexit Referendum Result

The people of the UK have voted in favour of leaving the EU and this has had an immediate impact on the markets. At the time of writing, the areas most affected are mainland EU markets and the sector with greatest impact has been the banks.

Risks mitigated well before the referendum

Aisa took action in the previous two quarters to protect our portfolios in case the potential of ‘Brexit Referendum Result’ caused market volatility and to protect against the event of a vote to leave. Earlier in the week of the Referendum, we Brexit Investment Strategy - The Pros and Cons of leavingpublished our views through blogs and we have made it clear that we had taken actions which reduced equity exposure, increased the flight to safety, invested in gold and ensured that we had a well-diversified portfolio. Of course we cannot claim that our portfolios will not decrease when the world markets all decrease but we anticipate them continuing to outperform their benchmark indexes.

Track record and risk

Aisa has a strong track record of successfully adapting to changing markets and the evolving world around us. Consequently, we have the required measures in place to help ensure we can continue to support our clients as the future negotiations develop. As a business, we already operate successfully across many borders in the EU and elsewhere in the world.

One strategy that has been widely suggested is for people holding money in cash should now consider investing in the new market lows. As the Bank of England provides support we anticipate banking shares will recover for example. This may be a strategy we follow but for now our portfolio recommendation is to Hold, rather than Buy or Sell.

Property and inflation

A weak pound will likely lead to import inflation and therefore UK inflation could increase. Interest rates may increase to strengthen and also suppress future inflation and this in turn will increase costs on loans and debt eventually. This, combined with a lack of inward investment, could lead to an impact on property prices both commercial and residential in the future.

People receiving income overseas from the UK

Impact is likely to be high on these individuals, although some of the initial losses on currency are likely to be reversed in the coming weeks and months. Now is a time when people overseas require more assistance and help from professional advisers than before.

Brexit Referendum Result Reaction

As we wrote in our recent blog, the initial reaction is likely to be dictated by uncertainty and fear of the unknown. We are likely to hear extreme statements from many politicians as they too react emotionally to the Brexit Referendum Result. Clearly, whatever happens to the UK is going to impact tremendously on our neighbours and we would hope that behind the rhetoric people in power with wise minds will understand that “cutting off your nose to spite your face” is unlikely to help anyone.

We believe the following two extreme outcomes could potentially affect the UK:

  1. The UK will, despite all rhetoric, be offered an alternative deal that will allow us to operate on the periphery of the EU whilst not impacting on allowing the EU project to move forward, or
  2. The EU will attempt to make an example of the UK and in so doing will potentially cause EU internal and ongoing crises with its own members that could lead to further break-up of the EU

Whilst outcome 1 may seem far-fetched, we would hope the likely outcome will not be far from this as it is in everyone’s best interests except perhaps the political elite in Brussels. We expect the politicians in Brussels to shout a lot but be largely side-lined as the heads of countries negotiate Brexit in a way that will serve the interests of Europe and the UK.

The following observation should help demonstrate why this may happen; Skoda, the largest producer of cars in Slovakia and the Czech Republic, sells 50% of its cars in the UK. Ireland trades in excess of £1 billion every week with the UK, which represents 70% of Ireland’s exports. We could use other countries or subjects such as security (armed force protection) as examples, but people in the UK have to understand the significant role that the UK plays in the EU which has largely been ignored as the debate has been an internal matter.

Hence, we suspect that the truth is likely to be somewhere between the two but closer to 1 than 2.

We will continue to monitor the situation and make recommendations to investment portfolios where appropriate, in which case you will be contacted to confirm you are happy with any changes.

In the meantime we are available to answer your questions so please do not hesitate to get in touch if you have concerns.

We aim to help you navigate through a potentially difficult economic environment and benefit from our Advanced Independent Specialist Advice.

Brexit Referendum Result End

 

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article.

This article was published in 24 June 2016

See various video’s about this at our channel TAILORMADE FUTURE.

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