Brexit: the deed is done, now what?
The outcome of the Referendum confounded the predictions of the opinion polls, the bookies and the markets. All three ended the working day on 23 June with the assumption that the Remain side would win, albeit by a small margin.
That consensus is one reason why the markets moved so sharply when the results emerged. Initial falls in the pound and the world stock markets were a knee-jerk reaction of a near instantaneous change of view. The resignation of the Prime Minister merely added to the short term concerns, even though it was always likely soon after a Leave vote.
David Cameron’s gamble has spectacularly backfired, leaving considerable uncertainty for the UK and the wider EU. Those of us who have investments in pensions, ISAs or other savings accounts will on paper inevitably be poorer at the end of today than we were at the start of the day. However, we should do well to remember that a loss is not a loss until it is crystalised. The next few days, weeks and months are likely to see significant volatility causing values to fluctuate yet further. The question is therefore what should investors do?
At such times, it is worth pausing for breath before taking any precipitous action. History suggests that trying to exploit the unavoidable turbulence carries considerable risks. As the Governor of the Bank of England said in his statement on 24 June:
“Inevitably, there will be a period of uncertainty and adjustment following this result. There will be no initial change in the way our people can travel, in the way our goods can move or the way our services can be sold. And it will take some time for the United Kingdom to establish new relationships with Europe and the rest of the world.”
The next few days and weeks will see sharp market movements, probably in both directions, as the markets find a new equilibrium. Those are conditions traders will attempt to exploit, but for long term investors a wait-and-see approach will generally make more sense.
Here at AM&A we believe that timing markets over the short term is impossible and the important thing is time in the market.
If you have any concerns around your investments or other questions, please don’t hesitate to get in touch with us.