Surprise was the first emotion that many felt when waking up this morning.
At 11 o’clock last night the leave campaign was starting to concede that the UK had chosen to remain in Europe. We have woken this morning to discover that Britain is now entering a new world.
So what does this mean? Are financial markets about to unravel on their way to capitulation?
We believe this is not the case. This is not 2008 all over again. Then, banks were close to failure and central banks had no proven mechanism to support the markets in such stressful conditions. Today, the banks are in a much stronger position and the Bank of England have the ability to pump in liquidity to support the markets should this be needed.
We are however in a period of uncertainty as markets react and come to terms with the news and the government begin the process of negotiating our new position with Europe and the rest of the world.
So what should investors do now?
For some period of time, our portfolios have adopted a defensive stance, with reduced exposure to shares and a consistently high exposure to bonds. This position should enable the portfolios to weather the volatile conditions that lie ahead. Indeed as I write, the fall in share prices is being significantly offset by the corresponding rise in bond prices.
We would advocate that investors don’t panic and continue to stick with their well-diversified portfolios.
Just as in 2008, this should prove the best investment strategy.
We will of course continue to monitor the situation very closely, and issue any updates as the situation unfolds.
If you have any queries, please give the team a call on 01462 687337 or email email@example.com.
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