Brexit

Darby Simmons, CFP®

As you will see, the UK voted to leave the European Union and markets are down around the world.  Europe was down 6-10% at 3:30a but has recovered a bit to down 5-8% currently.  The US markets look to open down about 3-4%.  US bonds, the dollar, and gold are rising as the knee-jerk reaction is to sell risk first and buy what is considered safe.

You may or may not have noticed, but lately I have been tilting portfolios quite heavily to the conservative-side.  This should serve to limit downside and set us up for the opportunity to do some buying.  The trick, as it always is, will be what to buy and when. 

I have been reading quite a lot on the potential implications of this decision. It largely amounts to uncertainty. The markets hate uncertainty and will sell first and ask questions later.  This will certainly be an adjustment and I will do my best to make adjustments that create profits for you.  Rest assured, no one knows exactly how things will play out but it won’t be nearly as bad as some commentators may imply, nor will it change the long-term rates of return that investments generate.

One interesting fact is that the markets had risen for most of the week as many were obviously betting that the UK would remain. Therefore, some of the drop today is simply the reversal of this rise and not a further drop from already low levels.

Don’t forget that today will be filled with lots of cross-currents in the market as many traders are forced to unravel bets on market direction both positive and negative.  This will result in quite a bit of volatility today but should settle down into next week.  The good news is that this has happened on a Friday so the media can dwell on it all weekend and just in time for June statements to be printed.

I will stay on top of this for you and get you more useful information as I get it.