A Quick Take On The Brexit Vote

I received an inquiry from a local business reporter today, asking about the “Brexit” vote, whether clients were panicking, if this would prove a major market turning point, and what, if anything, we were doing in portfolios.  I provided the following response and share it here with our blog readers.

I’ve had just one call this morning – not a panic, but concern.  I explained our position this way:  You live in a nice neighborhood and one of your neighbors’ homes suffers a fire that damages, but does not destroy, the home.  The neighbors are affected emotionally by the trauma, but practically speaking, they are unaffected.  Their neighbor IS affected, however.  So, you monitor repair progress to see if the house a) looks better than before the fire, b) worse, or c) the same.  At present, there is nothing for you to do.

Hence, the news is much more newsworthy than the vote.  This is the way I sum up the Brexit vote:  much more to come, and no amount of analysis can predict the outcome of the European Union.  Remember, the British Parliament is not even required to respond to the vote!  The government could decide to stay in.

So, just as is the case for all bouts of volatility, if you have funds that carry an obligation that is shorter than five years, those funds should not be invested in stocks.

I do believe that this is a seminal point in history – but, politically.  I believe the economic and capital market impact will be much more muted over the long term.  Britain will continue to produce and consume and trade with other countries.  This drives the economic and financial dynamic.

All in, no portfolio changes.

Boring, I know, but this is what successful investing is about.

All comments and suggestions are welcome.

Bob Bilkie, CFA®