EU Referendum: The electorate has given its verdict

The electorate has given its verdict. By a margin that is large enough to remove doubts about its legitimacy, UK voters have judged the benefits of an independent life outside the EU to be worth the costs of leaving it.

But whatever your feelings, you may be worried about how the stock markets are now reacting – not just to the actual result but to the news that David Cameron will be stepping down as prime minister, and the political upheaval this will cause.

The Governor of the Bank of England, Mark Carney was quick to inject some calmness to the proceedings explaining that the Bank had assessed the risks for an EU “Leave” vote and had put in place extensive contingency plans to ease them.

Mark Carney has stated; “We have taken all the necessary steps to prepare for today’s events.”

The FTSE 100 and the pound both took a battering immediately as the announcement was made, but have since rallied and are back broadly to the same levels we saw a week ago.

What Now?

We have mentioned previously that political uncertainty leads to economic uncertainty, and in order to manage our clients’ expectations we need to be honest and open about the genuine risks that can be anticipated as we walk a new path.

The key at such times of heightened uncertainty is to maintain a sensible longer-term view and not try to achieve the impossible task of second guessing short-term market trends. It may seem uncomfortable in the short-term, but selling into markets during times of uncertainty is not a sensible investment strategy

Economically, there could be slower growth and an increased possibility of another recession, with both consumer, and corporate spending cut-back in a wave of uncertainty – but we just don’t know.

It will take a minimum of two years to organise our exit from the EU, though we realistically expect it will take considerably longer. In the meantime trade will continue – with the French wanting us to drink their wine and Germans wanting us to buy their cars, and UK businesses will still want to export to Europe – it will be in everyone’s best interests to negotiate good trade agreements!

In the meantime monetary policy is likely to remain supportive, with a rise in interest rates seemingly off the table for the foreseeable future and the potential for more quantitative easing.

Uncertainty in the market also has a positive aspect by creating longer term buying opportunities as some shares fall in value.  Leading fund manager Neil Woodford today announced: “In the longer term, it is my view that the trajectory of the UK economy, and more importantly the world economy, will not be influenced significantly by today’s outcome.”

Innes Reid’s investment processes are tried and tested and we continue to do everything in our power to help our clients to navigate these market conditions.

We are Chartered Financial Planners, so will offer you the very best investment advice, portfolio creation and ongoing wealth management service.

Call us today on 01244 347583 or email info@innesreid.co.uk to arrange a free, initial consultation – we are available at times to suit you

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