29 Jun June Market Update – Brexit
As most everyone is aware, the UK decided to exit the European Union last Friday in a surprising democratic vote. This surprise event has sent markets lower around the world with US stocks dropping 5% in just 2 days. We have been cautious all year with clients’ portfolios by keeping a lower than usual allocation to stocks. The decision to remain lower risk was not based on the Brexit event but rather our research and analysis of the markets. The Brexit vote was a surprise event. We will continue to remain vigilant and cautious and are ready to take further action if necessary to protect your savings.
The UK vote to leave the EU was not predicted by surveys or polling and is a wakeup call that unlikely market events will occur. It is too early to tell what exact effect this will have on the UK and European economies. Markets have been rattled by this event due to the uncertainty and lack of precedence of a major country exiting the European Union. Although the UK does not use the Euro as a currency, they still enjoyed free trade and open borders with Euro countries. This came at cost of billions of dollars that the UK paid to the EU as membership fees. Many argued this fee and added regulation is not worth the cost. This argument won the vote. England is not the only country in Europe that feels this way. Notably France and Italy have already declared their interest in holding a similar referendum. The threat that other countries want to exit the EU is a major concern and could create a domino effect. The EU has had recently experienced other difficulties with Portugal, Ireland, and Greece needing bailouts in the last 5 years. As a parallel, the same rhetoric used by UK politicians to leave the EU is the same rhetoric used by Donald Trump here in the US. Controlling immigration and trade is striking a cord with voters around the world. We expect volatility remain high this summer and into the fall as these issues remain in front of the investors. We will continue to do our best to keep you protected and uncover opportunities that will be created.
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