INSIGHT: Where has the Brexit vote left the investors?
And so it came to pass...
There were always going to be fireworks in the financial services sector after a vote to leave. Most experts on the economy predicted it including us – What Brexit Could Mean for Investments
But where has the Brexit vote left the investors? Here’s a summary of where we stood at the end of last week.
- The financial markets’ dim view of the Brexit was clearly evidenced by the falling pound and a significant dip on the FTSE 100.
- FTSE’s dip was not quite as bad as predicted by some. However, it could be some time before we know if Brexit has had a lasting effect on the markets.
- Moody’s, the credit rating agency, has downgraded the UK’s credit rating to negative along with the UK’s long term issuer and debt ratings to reflect what is now seen as an uncertain economy.
- On the up side, gilt prices increased.
- Equity markets fell sharply – but were not calamitous for UK equities. It is still difficult to predict what will now happen with equities. The US equity market is worth watching: if its falls are small, there’s hope of a rally elsewhere.
- Uncertainty in the UK’s economy has increased and higher risk premiums will be demanded.
- Markets will remain volatile for the next few months while everyone takes in the full implications of Brexit for the UK, Europe – and the rest of the world.
- European markets have reacted badly to the Brexit vote. We need to monitor the effect of the future negotiations carefully to see their effect on the markets.
“For investors, the impact of this is most serious within portfolios where income is being taken. There are also implications for clients who have got capital growth portfolios too or are in the accumulation phase of their pension,” said Richard Eastwood, Partner, Financial Services.
“The consequence of all of these market movements are not universally negative, in fact for those of you paying into pensions or regular contributing into ISAs or other stocks and shares backed investments, this may present a once in a lifetime opportunity to buy assets at a ‘under market value’.”
So let’s look at the positives
With the dust settling after the Brexit earthquake, it is important to look at the positives.
- The UK economy has not crashed: it is reacting to widespread uncertainty in the business community about how the Brexit will affect their current investments, their investment planning and risk assessments.
- Most experts believe the UK economy is robust enough to weather the Brexit storm and it is hoped that the price of Sterling will take much of the flak.
- The various EU and international economies will adapt to the changed environment – just knowing the result will take some of the heat out of the market.
- Guidance for Investors
- Take a long term view based on your specific individual circumstances.
- Volatility in the markets will no doubt continue, but those who have worked to create a strong foundation for their investments with long-term financial planning should stay calm.
- Continue to diversify and build your portfolio with an eye on your long term goals.
- Keep in mind your personal view of risk.
It will take time for the full implications of Brexit become apparent. We must monitor developments carefully – and as with all investments, adapt as and when necessary.
Also in this issue of Insight
- What might the Brexit mean for your business?
- What effect might the Brexit have in the workplace?
- A Brexit it is then! What now?
- Where has the Brexit vote left the investors?
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Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.
This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.