As I went to bed last night I was under the impression based on the market movements yesterday, betting odds on Bloomberg and the general confidence exuded by all in the “Stay” campaign that we would today be using our 50% cash weighting to buy long equity positions and remove our capital preservation position, enjoyed by all our clients in times of market uncertainty.
As I went to bed last night I was under the impression based on the market movements yesterday, betting odds on Bloomberg and the general confidence exuded by all in the “Stay” campaign that we would today be using our 50% cash weighting to buy long equity positions and remove our capital preservation position, enjoyed by all our clients in times of market uncertainty. After a few hours my brain kicked in and I awoke to wonder what was going on (0030hrs) and I could not resist the temptation to go and watch the television.
As regards to which way it went, to be honest I could not call it and did not feel anyone could, so we were holding circa 50% in some portfolios in cash ready to deploy and we have spent weeks preparing the portfolios we are caretakers of, for our own clients and other IFA’s so “in” or “out” we were ready.
At 0400hrs we convened in the office and waited for the result to be announced and it was revealed overnight that 52% of the British public voted to leave the EU against 48% who voted to stay. As a result, the UK Prime Minister David Cameron has announced he will step down by October. In a statement made outside Downing Street this morning, Cameron said he would “steer the ship” in his remaining time as UK Prime Minister. He said Britain required “fresh leadership” to negotiate its exit from the EU, adding that the result was the “will of the British people” and an “instruction which must be delivered”. “I do not think it would be right for me to be the captain that steers our country to its next destination,” he added.
As a result, the markets are lower and we have assured our clients that they have nothing to worry about as we had taken action to protect clients’ portfolios prior to the events overnight, and that this reaction was actually an opportunity and not a threat.
What next?
To be honest we have no idea but it does raise bigger questions as regards to the viability of the EU project and we do not have the space here to discuss that topic. What we know is, that: –
At some point a new Prime Minister has to evoke Article 50 and that initiates the process for the UK to leave;
Once that is invoked we have two years to negotiate our exit;
This will cause market uncertainty in the short term;
This will cause Sterling to weaken in the short term against other global currencies making exports cheaper, but will increase how much you need to take on holiday with you in Sterling terms.
Beyond that what we now need to do is get a strong leader, negotiate fairly and get Great Britain working again as a cohesive unit and unite the country, so those that do not live in London feel part of the country and do all we can to keep the United Kingdom, united.
Because we implemented our Capital Preservation mandate in line with our Outcome Based Investment (OBI) principles, our clients do not have to worry about this significant event having a detrimental impact on their portfolios. If you would like to find out more, please give us a ring on 01604 621467.