How are your investments impacted by the vote to leave the European Union?
Friday 24 June, 2016
Richard Porter, independent financial adviser St Albans reviews what leaving the EU means for your investments
The British people have voted to leave the European Union. Final voting figures show 52% of the electorate voted to leave the EU and 48% voted to remain. The government will now begin the long process of leaving the EU. Nothing will happen straight away and many commentators have suggested that it could take at least two years for Britain to finally leave the EU.
Although equity markets and currency markets have been volatile in the months leading up to the EU vote, in the days before the EU Referendum markets started anticipating a ‘remain’ vote. When the markets opened on Friday morning following the ‘leave’ vote the FTSE 100 Index fell over 8%, and sterling fell to its lowest level in three decades.
David Cameron has announced his intention to step down in the next three months which will trigger a Conservative leadership election. The Governor of the Bank of England has commented that they have contingent plans in place and that UK banks have plenty of liquidity. In the short term sterling weakness may cause prices to rise, this and the uncertainty may cause some weakness in domestic demand which may impact economic growth within the UK.
Richard Porter, Director at Lonsdale Services and independent financial adviser in St Albans said: ‘We are likely to experience continued market volatility over the next few weeks as the politicians agree how we exit from the EU, and the Bank of England works to stabilise and support the markets. This is a difficult time for investors and our clients are understandably concerned. However, If you view a long-term chart of the UK stock market over the last 28 years, in our ‘Assessing the impact of market volatility on your investments’ article, you will see how other major economic and political events in our history have affected the performance of equity markets in the short-term. At Lonsdale Services we always recommend our clients keep a longer term perspective when they invest in equities so they can ride out any short-term market volatility. We also 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. As a result we can minimise the effect of volatile equity markets on your investment portfolio.’
Although we believe periods of stock market volatility and short-term setbacks should be considered within a long-term context, sometimes it is not always possible. If you are coming up to retirement or have entered into an income drawdown arrangement you may want to contact your independent financial adviser to get individual investment advice.
