The true impact of Brexit will not be known for some time, although the financial markets are set for a period of volatility.
The fear of the unknown will create a period of uncertainty following Britain’s decision to leave the European Union and could last for some time.
However, the daily movements for longer term investors following the Brexit result is relatively unsubstantial with not much change, as the world watches and waits to learn of Britain’s longer term financial plan and develops an EU exit strategy and timetable.
It is important to note that for generations, the UK has represented one of the strongest overseas investment destinations for global investors, particularly given its product diversification, a proven track record and a clear legal system, which in fact creates an immediate opportunity for international investors.
WHAT ARE THE IMPLICATIONS FOR THE ECONOMY?
It is unsettling for investors to see the impact Brexit has had on their investments, and many may be tempted to cash in now in fear of what lies ahead, however, the long-term investor knows that this would certainly be the wrong decision at this time.
Investing is for the long-term. As history indicates, drops in the markets tend to be over the short-term, and we have seen markets rebound and recover in previous economic downturns.
The volatility in the market must also be considered. Whilst stocks initially fell in the immediate aftermath of the Brexit decision they also regained ground later that same day.
We would call on the international media to ensure that reporting of such volatile economic markets is fair and accurate – or investors could be panicked into making decisions based on half-truths and that would clearly make the situation worse.
For now, it is still unclear as to what will happen but for the moment the UK is still part of the EU and negotiations are required to assess how we will now interact with the EU.
IN OUR VIEW:
This is a first for the nation and therefore naturally we do expect the economy to remain volatile for the moment, but it is too soon to take a definitive view on the outcome. We certainly expect movements to slow in the UK for the second half of the year. For now, however nothing much has actually changed.
Similarly, the underlying qualities of UK assets have not changed, UK real estate, commercial and residential, still commands the highest rental yields in Europe and has a history of delivering substantial capital appreciation. Non of which are pegged to the UK being part of the EU.
Other global economies are likely to be impacted, although less so than UK markets, and only for a short term until the uncertainty has eased. Currently, the day-to-day working of the economy hasn’t changed substantially, Brexit adds uncertainty and negotiations will need to occur but trade will continue.
Equities are renowned for their volatility, and this was pertinently underlined following the EU referendum.
The FTSE fell sharply following the result, but in just a few days following this it had recouped its losses. Investments in the financial market cannot be guaranteed in the short or mid term, however this does not affect all investments.
Over a longer term, real estate investments for example will bounce back and flourish.
Quarterly interest payments and yield returns are still readily available. As with the majority of our investment options, investors tend to not gravitate towards these for a short term fix. The best returns are made over a longer period and the vote for Brexit highlights the necessity to adopt the long term investment opportunities.
Ultimately, once this period of uncertainty dissipates, both the value of the pound, UK projects and the real estate market will begin a new upward cycle.
There is currently a fear factor amongst investors, creating an over action and prompting investors to deliberate the liquidation of their assets. Sentiment may be fragile for a while, however the advice is to wait it out, and let your investments balance over the longer term.
HOW WILL THIS AFFECT UK REAL ESTATE AND PROJECTS?
GENERAL INVESTMENT AND MEASURES WE HAVE TAKEN:
Central Banks are likely to come together to support economic growth and stabilise investor confidence, with the Bank of England already announcing measures to support UK banks should they be required and potentially cut their base rate in a bid to restore consumer and business confidence.
We manage client portfolios to ensure there is a good balance between potential risk and return. There may be opportunities for improved gains in certain areas, however until this time we continue to adopt a non-correlated and lower risk strategy until the future becomes clearer.
For those investing in Greyfriars Portfolio Six Service, which focusses on niche and non-correlated investment strategies, investors have already significantly reduced their risk of volatility as these investments are less likely to be affected by global sentiment in world markets.
The underlying investments within the service are usually unquoted Corporate Bonds secured on real assets, which can generate returns in the high single figure digit arena with very little volatility.
The investment vehicles typically have a life of between three and seven years. The vehicles are not quoted on any stock market and will not, therefore, be subject to the vagaries of price movements.
The Post-Referendum UK places everyone in unchartered territory, however it is important to take perspective. The turmoil is not on the scale of the 2008 financial crisis and It is key to remember that investments are long-term decisions and they can recover in value over time.
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