Who would’ve thought this would happen? The world woke up Friday, June 24th to a new reality: the UK voted to leave the EU by a thin margin — roughly 52% to 48%.
Interestingly enough, poll results (such as they were) were predicting a bias towards staying in the EU. Many portfolio managers and hedge funds had reversed their positions from being “short” on the market to going “long”, which drove the US stock market to lofty levels earlier in the week. Surprise! Turns out the “smart money” wasn’t so smart after all…
Since the beginning of the year, we at Urban Wealth Management have been in the camp that this will be an ugly summer. (Click for a short video.) But frankly, we didn’t have this factored into the formula. Over the next weeks, months, and perhaps years, there will be a massive amount of activity within the UK, the EU, and many other countries. UK Prime Minister David Cameron has resigned… Who will be the next Prime Minister? What will his or her policies be? Will other EU countries elect to exit? New models for business, commercial, and immigration ties will need to be negotiated. There will be lots of closed-door sessions over the several days and weeks while they work through and hammer out the details.
So what do you need to know and do?
- As always, don’t panic. We live in a global world and there will always be global events affecting the stock market.
- Out of all of this mayhem, the US will stand tall as being a stable, economic leader. However, we have some major events on our own plate in the US: two major political conventions and a presidential election. Therefore, there could be still more volatility in the global stock markets. Although poised to gradually raise interest rates over the next few years, our Federal Reserve is cognizant of both national and global events—and while we are not expecting any problems in our banking system, the Federal Reserve has signaled that they are prepared to provide support to the markets by any means necessary.
- We have been waiting/looking for an entry point to initiate and/or add to positions to existing portfolios. But because we expect more volatility in the near term, we will wait. The market value today is similar to what it was this time last week, so there haven’t been significant lows as of yet.
- International markets understandably will be weak. Reviewing your international and emerging market positions to determine what adjustments your fund or portfolio managers are making will be critical to managing through this period.
- Our office will be inundated with notices for a multitude of conference calls, updates and meeting notices. We will keep you posted on the results of those sessions and provide you with updates.
Bottom line: There will be a lot of noise in the coming weeks and months. Unless your cash flow needs and financial objectives have changed, there is no need to make major changes. At UWM, we will work even closer with our clients to filter through all of the headlines and soundbites to determine if any adjustments need to be made to their financial plan or portfolio.
Interested in a second opinion? Call us for a complimentary review. Forward Thinking ~ Smart Planning — Let’s look forward together.