28 Jun Brexit News
In an historic development, U.K. citizens have voted in favour of their country leaving the European Union (EU) by a slim margin of 52% to 48%. The news triggered a dramatic reaction on global financial markets on June 24, with share prices declining sharply and prices for bonds and gold increasing. In currency markets, the U.S. dollar was up against most currencies, while the euro and British pound dropped.
Given the magnitude of these moves, I am writing this to provide you with some perspective on these events and what they might mean for us.
Why did the markets react this way?
First of all, the financial community in general believes that the prospect of the U.K. leaving the EU – or “Brexit” – will be harmful to the British, European and global economies and their financial systems because of the increased uncertainty and impediments to trade and finance. With regard to the day-after market reaction, many market participants were simply caught by surprise. Although the vote was seen as too close to call throughout most of the campaign, polling in the final week suggested that the “remain” side had a slight advantage.
What does this mean for investors?
For short term investors Brexit could have a significant negative impact on portfolio results. However, with the investment strategy that I employ in managing our clients’ money, I anticipate that the impact of this event on our clients’ long term results will be negligible. Again, we anticipate the impact may be limited. This event will indeed lead to greater political uncertainty and financial in the short-term Other things to consider include the fact that referendum result is not binding on the British Parliament, and any separation from the EU will take years to negotiate. Meanwhile, companies continue to do business much as they did before and the global economy continues on its path of slow but positive growth. In fact, many professional investment managers believe the current market decline represents an opportunity to buy quality companies at attractive prices.
What should I do?
My advice to our clients is to simply stick to their existing long-term investment plan, which is tailored to their individual objectives and time horizon – criteria that are not affected by Brexit. Our clients’ plans take market volatility into account by having a well balanced portfolio.
If you have any questions, please contact me.
Harry Perler, CFP,CLU, CPCA, CEA
Financial Planner, Perler Financial Group/Worldsource Financial Management Inc
CEO, Perler Financial Group
Office: 604.468.0888 Ext. 32
The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, the Globe and Mail and the New York Times. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Mutual Funds and Segregated Funds provided by the Fund Companies are offered through Worldsource Financial Management Inc. Other Products and Services are offered through Perler Financial Group.