How will the EU vote affect your investments?

Friday 17 June, 2016

With many claiming that the vote to stay ‘in’ or ‘out’ of the EU is too close to call we briefly review how the result of the EU vote could affect your investments.  

Simon Prestcote, independent financial adviser & chartered wealth manager in Barnet said:

‘A vote to leave the EU would cause uncertainty in financial markets and would reduce the value of individual client portfolios in at least the short-term.’

Volatile equity markets

Equity markets have been volatile ahead of the EU vote, however, it’s not just this uncertainty that is affecting equity markets.  In August last year Mark Slobom, Chair of Lonsdale Service’s Investment Policy Committee & independent financial adviser in Harpenden wrote about ‘Market Volatility’ in relation to the sell-off in equity markets following the devaluation of the Chinese currency.  Since then equity markets have been particularly unsettled as growth concerns in China persist, and the speculation over when the Fed will next raise US interest rates hangs over the US equity market. 

Short-term implications following the EU vote

There are likely to be many short-term implications following the EU Referendum vote.  We have witnessed big moves in sterling recently but the expectation that sterling will fall is highly likely with a ‘leave’ vote. Foreign holders of UK equities may then justify selling on the basis they want to escape a currency fall which would negatively impact the UK equity market.  Although the UK equity market is more likely to suffer on a ‘leave’ vote we may see companies with non-sterling earnings benefit.  There are currently differences of opinion over how much they will be affected but many City Institutions suggest a fall of 5-20% in UK equity markets on the day of the voting announcement.

Whilst a vote to ‘remain’ may still leave political tensions within the government, it could reasonably be expected that the economy would improve with the return of business investment and employment hiring which have been subdued during recent months in the run up to the EU Referendum.  A ‘remain’ decision should see sterling and the UK equity market experience a relief rally.

A vote to leave may cause interest rates to be changed sooner than expected.  If the status quo remains most forecasters believe that interest rates should remain relatively unchanged for the next 2-3 years.
Mark Slobom, said ‘clients are understandably concerned about current market volatility, and the uncertainty surrounding the outcome of the EU referendum vote.  However, we always suggest clients maintain a long-term perspective when they invest in equity markets, and at Lonsdale Services we recommend clients invest in a diversified portfolio where only part of their investments are exposed to UK and global stock markets in line with their individual attitude to risk.’

Lonsdale Services EU Referendum Seminar – to Brexit or Bremain?

On 7th June 2016 Dr David Stubbs, Macro Strategist at J.P.Morgan Asset Management, joined our Barnet team as the guest speaker at our European Union referendum seminar - to Brexit or Bremain,’ held at Hadley Wood Golf Club.  Over 40 guests, many of them clients of our North London office, enjoyed afternoon tea before listening to Dr Stubbs’ presentation. 

 

J.P.Morgan Asset Management Presentation - Lonsdale Services EU Referendum Seminar 7th June 2016 Latest News Next Article Previous Article