After the historic referendum on 23rd June which resulted in a decision to leave the European Union, the initial worries about the UK plunging into recession with stock market Armageddon have been unfounded.
There may be difficult times ahead, but the actions taken by Government and the Bank of England to calm uncertainty have been effective.
Whatever your political opinion on Brexit, financial decisions should be rational, not emotional. Actions taken now can have far-reaching consequences farther down the line. Our opinion has always been that investments should be made with appropriate time horizons in mind and always according to the amount of risk a client feels comfortable with.
The UK and European markets are just one asset class that makes up part of a diversified portfolio that is designed to withstand shocks like this.
We meet regularly with the fund companies we work with either in person or remotely so that they can keep us updated on any strategic changes to their funds and what is driving those decisions.
When we think of investments, many people jump to the stock markets, but stocks and the economy are just one part of a complex jigsaw. Other factors include currencies, precious metals, oil and other commodities, government bonds, interest rates, politics and trade.
Initial shocks to both the FTSE 100 and 250 have largely been short term so far, but the main factor in long-term buoyancy will be the nature of the trade agreements thrashed out with both the EU and the rest of the world. A lot hangs in the balance, and it will take time. Multi-asset diversified portfolios such as those we use are a great way to make sure you are protected.
Analysists were surprised that in light of the referendum, Bond rates went down not up. Given the choice between Italian Government Bonds for example and UK Government Bonds, investors obviously thought the UK was a better bet.
However, caution is generally being exercised. With interest rates currently so low, and global GDP so weak it doesn’t quite stack up. Some of these threats were here long before Brexit and in some ways have never left us since 2008. You could argue that the problems in the financial system contributed to the desire to leave the EU, rather than being a result of Brexit. In the interests of balance, it might be that some of the problems will be exacerbated as a result? Only time will tell.
At FMB our approach to investment is that we leave decisions about what to invest in (and when) to expert fund managers in actively managed diversified funds. You are most likely invested in those kinds of funds from the selection on our investment panel.
If you would like more information on how FMB selects funds and how our Investment Committee works, e-mail Rebecca for our free guide at firstname.lastname@example.org