As you have likely already read, the United Kingdom voted in a referendum to leave the European Union yesterday. While there are some complicating factors, the turnout and margin were sufficiently large to indicate that there is no going back.
This result was unexpected by most investors and will have significant political, economic and legal implications for both the UK and the EU. Consequently, we are seeing dramatic declines in various stock indices in virtually all markets - including the US.
While I expect that our portfolios will experience some decline in value as a result of this development, I expect the impact to be relatively limited and short-term in duration. Our clients generally have considerably less exposure to the foreign stocks than the “average” diversified, professionally-managed investor. And, the process of the UK’s withdrawal from the EU will be a long and complex one.
Accordingly, this development does not justify any changes in investment strategy at this point.
However, markets trade on anticipation and exaggerate the significance of such developments. As I’ve argued throughout this year, I expect to see volatility in 2016, and the next few days are unlikely to disappoint.
I’m reminded of the old J.P. Morgan axiom that the best time to buy is when “there’s blood in the streets.” If we do see significant sell offs, this would likely justify most clients increasing their exposure to equites overall, and UK stocks in particular.
In short, I don’t recommend making any significant moves, other than to see this as possibly a buying opportunity for UK and European stocks in relatively small amounts in the coming days and weeks.
No comments:
Post a Comment