Brexit Referendum – Result

Needless to say, investors will now be considering the effect that the recent Brexit vote will have on their portfolios.
 
At the time of writing the FTSE 100 is down around 4%, having recovered after opening down some 8%.  Other markets have sold off more, with the Japanese market down around 11%. The rally that we experienced last week has exaggerated the dip in prices, but the relative weakness of the pound has ameliorated the sell-off in UK stocks to some degree, whilst other equity markets have sold off further.
 
Whilst this is certainly a shock to the UK Economy and a dent to the Eurozone economy it does not seem likely that this vote will fundamentally derail the global economic recovery. It is, as is often the case, less dramatic than might have been anticipated given some of the extreme projections that were published in the run up to the referendum.
 
The longer term outlook for the UK is harder to assess, it seems likely, however, that the uncertainty will contribute to a lower rate of GDP growth in the UK that we might otherwise have expected over the next year or two. The weakness of the pound is also likely to bring inflation with it, as imports become more expensive.
This seems likely to have a knock on fiscal effect in that there is likely to be a need for looser policy, and more borrowing than George Osborne anticipated.
 
There are quite a few European elections coming up in the next few months, the first of which is the Spanish election which falls on Sunday, aimed at resolving 6 months of political deadlock. There is also the French Presidential election for which Marine Le Pen, an avowed Eurosceptic, is a strong contender. With the current rise in anti-EU sentiment on the continent it seems likely that the next couple of years are going to be a volatile time for equities.
 
If your investment outlook remains medium to long term then this should not be a great cause for concern, our selected fund managers have plenty of experience and can be relied upon to take advantage of market volatility.
 
Should you have any questions at all, or wish to revisit the asset allocation of your portfolio, then please speak to your usual clarity contact.