For Mark Roberts’ Use: If you were surprised by the Brexit outcome on June 23, you weren’t alone. Going against polls that predicted Britain would remain with the European Union, voters actually decided to exit. And of course, markets responded negatively to the surprise. Stock prices dropped, rising bond prices caused interest rates to fall, and the value of the British pound declined sharply.
The overall impact… While we’re all surprised at the outcome, it’s best not to panic over the long-term consequences. First, Britain won’t be leaving the EU immediately. There will be a transition period during which details are sorted out. Second, the UK only comprises about 4 percent of the world’s economy anyway. As Britain renegotiates trade and economic relationships globally, the country might see a recession. But that recession is unlikely to make a major impact internationally.
Yes, the surprising vote triggered some market uncertainty. But that’s to be expected in the days immediately following a major event. Moving forward, keep these three rules in mind.
Don’t rely too heavily on predictions. The Brexit vote is a perfect example of how an outcome can differ from predictions. After all, the polls had previously indicated that Brits would vote to stay with the EU! Avoid basing your investment decisions entirely upon predictions, and always position yourself for a variety of different scenarios to manifest. Diversify your portfolio across a mix of stocks, bonds, and international investments so that your future never depends too heavily on the outcome of political events.
Focus on the long term. It’s normal for markets to experience turbulence in the wake of events like Brexit. But the feelings of uncertainty and fear that result from political happenings rarely last long, in the grand scheme of things. Europe’s economy grew by 2 percent in the first quarter, and our own economy is expected to continue growing at 2 to 2.5 percent. Don’t worry too much about temporary market conditions, and focus on the likelihood of long-term growth.
Keep your personal financial goals front and center. Hopefully, you’ve already analyzed your personal risk tolerance and long-term goals, and you’ve diversified your portfolio accordingly. You’re already set up to sail through stormy times in the market. Rather than worrying about recent events, try to look for opportunities. Perhaps now, while prices are low, is the time to add quality international stocks to your mix of investments?
Give us a call, and we’ll be happy to continue this discussion. If you’re feeling uncertain about the impact of Brexit or your financial future in general, we will be happy to take a look at your portfolio with you.