Friday, June 17, 2016
The impact on your investment planning
Many of you have asked our thoughts on the upcoming referendum. Of course we don’t know which way the vote will go and we’re not campaigning for either side but whichever way the vote goes the political impact will be profound. We’re interested in what it means for your investments.
In recent weeks both the pound and stock market have fallen, as polls have shown increasing support for ‘Brexit’. Government bonds have gone up in value however, and most portfolios are also up.
If the United Kingdom votes to remain a member of the European Union things are likely to continue much as before. The pound may recover. And there could be a short-term economic boost as the future looks more certain. After any immediate reaction financial markets are likely to be calmer. But the problems which led to the referendum in the first place won’t just go away.
If the UK votes to leave the EU barriers to trade will increase. Most economists think the pound will fall further, perhaps by as much as 15%. This means inflation will be higher. Economists also say the UK’s short- and medium-term economic prospects will worsen. But a weaker pound makes exports more competitive. It also increases the value of overseas earnings, which will benefit several large UK companies.
In the short term a leave vote will create instability both in the UK and the EU. Financial markets will be much more volatile and you should be braced for that.
However, over longer periods, sound investment strategies will be unaffected by the referendum – in or out.
As ever our advice is to:
- Make sure you’ve got enough cash
- Invest in a well-diversified portfolio
- Avoid trying to time markets