Against the polls and against the sentiment of the financial markets, Britain’s historic vote to leave the European Union has had an immediate, and significant impact on global markets. Britain voted to leave the European Union by a margin of 52%/48%.
Financial markets, and in particular the British pound, were quick to react. The British currency fell as much as 11 percent to its lowest level against the U.S. dollar since 1985, before recovering slightly The swift market reaction to the referendum was no big surprise. With so many questions as to what will the UK look in the years ahead, be it financially, socially or politically, the impacts of Britain leaving the EU will play out over time
As seasoned investment professionals, we are accustomed to the fears of investors and we try not to over-react to these.We are aware of the economic, social and political environments around us, as bottom up stock pickers, we do not construct our portfolios or make investment decisions based on political and/or economic events, We look for the long-term characteristics of companies as we believe that these are the factors that create shareholder value.
Despite multiple views on the situation, a few points remain very consistent when it comes to “Brexit”:
- All portfolio management teams already had thought of the potential for this situation and in many case are already positioned without the need for significant adjustments.
- The short term volatility should not cause us to be rash and act quickly as the initial selloff has already rescinded and additional supporting actions of the various Central Banks is likely.
- The longer term political consequences are not clearly known at this point but the economic consequences outside of the UK, and to lesser extent Europe, are expected to be modest at this stage.
We remain cautious in the face of rising uncertainty and weakening confidence.We will continue to keep you informed as the situation in Europe unfolds. As always if you have any questions please feel free to contact us.