Yesterday, in a surprise move, the people of the UK voted to leave the European Union, and Prime Minister Cameron was more-or-less forced to resign. Markets around the world had been rising for the last few weeks, as it looked to most observers like the vote would go the other way.
Major stock markets opened down, and drifted further down all day, as traders, politicians, and pundits all searched for clues as to what could come next. The venerable English “newspaper” The Economist offered their thoughts on “how to minimise the damage”, both political and economic. And The Guardian reported that Europe’s political leadership wants to force the UK’s departure as quickly as possible, since “Leave means leave”. CNBC, meanwhile, offered a list of eleven ways that the Brexit could impact the world’s economies — not just in the short-term, but in the longer term as well.
Our take? We believe that today’s market sell-off is a short-term reaction to the surprising news. We decided not to do any trading today on behalf of our clients, in the belief that today’s extraordinary volatility would make getting good prices for securities more difficult, and could lead to costly errors. Instead, we want to wait and see what conclusions we all can come to over this weekend, and how the markets behave early in the coming week. Generally speaking, we agree with Bob Doll of Nuveen Asset Management, who argued today that the global economy is still overall strong, and the US economy perhaps stronger than most — and that this market turbulence may provide us an opportunity to review once more our long-term investment commitments.
Please let us know if you have concerns about your portfolio, and the way it’s structured, in light of this week’s events.