Brexit – what next?
Written by Carl Turner on June 29, 2016.
Well, post-Brexit events seem to have taken pretty much everyone (except ex-Lib Dem leader Nick Clegg!) by surprise. While on the eve of the referendum markets were pretty buoyant and sterling was strong indicating a Remain victory, the wind changed direction in the course of the night and by 5am prominent Leaver, Nigel Farage, was declaring 23rd June 2016 the UK’s independence day. The British public had spoken and 52% of those who voted wanted out of the EU.
Exit was always going to be something of a step into the dark as no nation has previously left the EU but even before Article 50 has been triggered by the UK government – the action required to start the legal process of leaving according to the Lisbon Treaty – events seem to have descended into chaos.
Indeed, world leaders and UK citizens alike are reeling over the events of the last few days: Prime Minister David Cameron has resigned, PM in waiting, Boris Johnson, is somewhat less enthusiastic about Brexit than his pre-referendum ‘Leave’ status would have indicated, the UK has lost its Moody’s AAA rating, Scotland’s First Minister, Nicola Sturgeon, is demanding a new referendum for Scotland and commentators are questioning if Article 50 will actually ever be invoked.
In spite of pressure from EU leaders who want a swift and clean break, British politicians seem to be in no rush to get Brexit officially underway with Cameron delegating the task to his successor who is unlikely to be named until the Conservative party conference in October.
If there is one thing businesses and markets don’t like it is uncertainty. Many were hoping that the referendum result would bring back some confidence and perhaps stabilise the volatility which we have seen over the last few months but it is becoming clear that things are even more uncertain than ever.
Markets reacted predictably badly to the news – a massive £2tn was wiped off share values on Friday and the pound hit a 31 year low. Today The Telegraph is reporting £85bn losses for the FTSE over the last three days with bank stocks in particular plunging – Barclay’s shares are down 27% since Brexit was announced.
Those relying on sterling income and living abroad will be feeling the pinch as its value has tumbled. Similarly, anyone with portfolios and investments heavily biased to the euro or sterling will have seen the value of their portfolios fall significantly.
It is too late now to start switching your assets away from Europe – the horse has already bolted. Doing so will only turn paper losses into actual ones and you risk missing out when markets start to recover as they inevitably will at some point. The best course of action if at all possible is to hold and wait. If you take an income from your portfolio and can cut back on withdrawals in the short term to avoid selling when markets are at this low point, so much the better. On the other hand, if you have cash to invest you are in a good position - now is a great time to do it!
Whatever your situation, if you are seeking advice or assistance regarding your investments, please do feel free to get in touch. I don’t have a crystal ball to tell you what will happen now and I certainly can’t work miracles but I will do my best to help you make sense of your financial affairs through these volatile times.