I wanted to communicate my thoughts and observations regarding the British vote to exit the European Union and its potential effect on your investment assets. Friday morning witnessed the initial effect of short-selling traders attempting to guess the effect on the market post-the-vote as the Dow dropped 450 points at the opening. The market really did little after the opening; however it did slide an additional 200 points late in the final trading hour. I suspect some traders did not want to keep positions over the weekend; therefore they closed positions quickly near the end of the trading session and drew the market down another 0.5%. In the short term you should expect continued volatility because the market does not like uncertainty. As the days pass and the “blame-game, etc., etc.” news being reported ceases to hold the interest of the general public; this story will move from the front page to a by-line. To overstate the obvious, this marriage was 40+ years in the making and it will take quite some time to unwind (possibly up to 2 years). The internals are very complex and very financially unique; therefore, the media will not be able to truly understand the concepts nor will they be able to clearly articulate to the public who will be less receptive then the media. Ultimately Brexit should slowly dissolve into “an historic event that no one can predict the final outcome”.
Now, how will this impact your investments? If you reviewed your brokerage account(s); you will notice that I did not buy nor sell any securities in anticipation of the vote. My view was that regardless of the outcome, the near term effect would not be significant and there was a much greater risk to your investment trying to “time the market”; therefore I felt that our asset allocation (i.e. very light on International securities) was such that it would weather the storm and we would participate on the up-swing when the dust settles.
I will be happy to chat with you in greater detail at any time, please give me a call at your convenience.