How Brexit May Impact the Market and Your Clients

By Rebecca Moore | June 24, 2016
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Following news of the Brexit vote, several investment industry firms issued commentary.

A market update from MainStay Investments, a New York Life company, says, “Since the markets can be unpredictable, it remains important to construct your portfolio to withstand multiple scenarios. Therefore, diversification continues to play a vital role. Allocations should made to stocks, bonds, and other asset classes that are not always correlated to one another.

Charles Reinhard, head of portfolio strategy at MainStay Investments, who authored the market update, says, “Currencies can be hard to predict. In the 30-, 60-, and 90-days leading up to the Brexit vote, the British pound appreciated and depreciated approximately 50% of the trading days against the euro and U.S. dollar. The same can be said for the euro against the U.S. dollar. For many, we believe a 50% currency hedge on international equity exposures represents a thoughtful way to manage these ups and downs.”

A press release from Cerulli Associates says a concern is that Britain will lose its status as a major European funds hub. “This concern is ill-founded. As the largest retail funds market in Europe and the most attractive in terms of DC opportunities, Britain will continue to attract interest from foreign players wishing to expand their footprint in Europe,” the announcement says.

Nigel Green, founder and CEO of deVere Group, says there are three things investors should remember:

  • Keep calm and carry on. Hasty decisions are typically not the wisest ones. There remains too much uncertainty around at the moment to take strong bets on any particular asset class, sector or region.
  • Focus on the longer term. Yes, the political landscape has changed overnight, but your financial objectives have not.
  • Keep an eye on other important geopolitical factors that will influence markets and therefore impact your investment decisions. These include China’s economic growth, the possibility of Brexit contagion as other countries seek to exit the EU, the U.S. election, the failure of negative interest rates in Japan and the Eurozone to stimulate sustainable recovery, and the Fed’s nervousness over the U.S. economy.