CTWM Investment Committee: BrexitSubmitted by Connecticut Wealth Management, LLC on June 24th, 2016
By now you have probably seen that the citizens of the United Kingdom have voted to leave the European Union, otherwise known as the “Brexit”. This news has sent shock waves throughout the world and the markets as global leaders and investors alike grapple with how this news will affect all of us in the short and long term.
In that regard, you are probably wondering how this vote affects your investments. Please note as follows:
• Markets generally do not react well to uncertainty, so as long as the Brexit dominates the headlines, we expect elevated levels of volatility to ensue.
• While we did not necessarily expect this result, we have been preparing for it. For one, the changes that we just made in the bond portion of the portfolio were to reduce risk and protect capital in case we saw types of market movements like these. Further, for some time we have kept the exposure to non-US stocks well below how we typically allocate to these asset classes. While cheaper valuations in these areas have been enticing, we have resisted the urge to increase these allocations given the uncertainty surrounding this Brexit vote.
• Most instances of near-term volatility provide long term buying opportunities, so we will be watching closely in the coming weeks to determine if this news offers us an attractive entry point to buy assets at discount prices.
• Perhaps most importantly, it is times like these that remind us why we spend so much time planning and on making sure that you are taking the appropriate amount of risk to meet your goals. By doing so, you know you are not left overexposed to this type of market risk and that the volatility your own portfolio will experience will NOT steer you off of the course we have worked hard together to build.
Please feel free to contact us with any questions.