Many of us may not have believed it would really happen, but as we all know by now, the people of the United Kingdom have voted to leave the European Union. Everyone knew the vote would be very close – and close it was, with the final result at 52% to leave and 48% to remain – but the general feeling was that the Remain side would prevail.
Millions around the world, not just in Europe, are wondering what happens now, and in some quarters, the panic has already begun: European equities plummeted close to 10% in some cases (the Financial Times Stock Exchange 100 dropped about 5%). The British pound fell to its lowest level since 1985, dropping 10% in just six hours, the modern pound’s biggest single-day shift ever. Even oil prices have tumbled, to less than $48 a barrel. North American markets opened 2–3% down.
But there are signs that cooler heads are prevailing. British equities have already partially recovered across most major markets. Markets are beginning their climb back up. The Bank of England had indicated that it had plans in place regardless of the vote’s outcome. “We are well prepared for this,” BoE governor Mark Carney said. “The Bank of England will not hesitate to take additional measures as required.”
The sky has not fallen. So don’t panic.
Keep calm and carry on
The effects of Britain leaving the EU will be significant around the world; there’s no question about that. But they will take years to reveal themselves. So right now the key for investors is not to panic or over-react. The 2008 financial crisis wasn’t that long ago, so we can all remember what happened to people who panicked and bailed out of the markets when they hit bottom: their rash actions guaranteed that losses that could have been temporary were made permanent.
Stay the course. Look at the lower markets as a great opportunity to buy.
If you’re worried about your cash flow stream, be assured that we have sufficient cash positions in place for you to ensure that your needs are met. Your long-term plans should remain intact and that’s where your focus should be right now – because Brexit is a long-term event. As reported by the CBC, according to the Treaty of the European Union, discussions to separate Britain’s economy from the EU could take two years, and that process would begin only after the British government formally notifies the EU that it intends to leave. Some on the Leave side of the campaign have said that that may not happen until 2018.
So the key is to refrain from taking any sudden action. Don’t let fear jeopardize your long-term goals. If you have any questions or concerns about your portfolio, please don’t hesitate to get in touch and we’ll discuss it with you.