BREXIT
Update: 24th June 2016, 16:51 – UK Markets Close
Market movements are as follows for today:
UK equities are down – 2.85% *
European equities are down – 8.56%*
US equities are down – 2.74%*
Within currency markets
Sterling has depreciated – 8.36% against US Dollar and is now at 1.3635*
Sterling has depreciated – 6.1% against the Euro and is now at 1.2272*
Markets have improved since this morning but there have been some big falls over the day. All eyes are on next week and the UK’s plan to extract themselves from the European Union. As we have move visibility and data, markets will react and move. Volatility levels look to be high as investors focus on continued news. True Potential will keep you informed of all the major events as they unfold.
*Source: Bloomberg
Update: 24th June 2016, 15:30 – US Markets Open
Markets have partially pared back losses this afternoon after the US markets have opened and also after investors have had time to digest today’s news.
Currently for today, markets have moved as follows:
UK equities are down -1.93%*
European equities are down –7.1%*
US equities are down –2.13%*
Within currency markets:
Sterling has depreciated –7.05% against US Dollar and is now at 1.3828*
Sterling has depreciated –4.68% against the Euro and is now at 1.2456*
We are very much not out of the woods yet but market sentiment is improving. The view from both True Potential and our fund manager partners is to sit tight as events unfold.
*Source: Boomberg
Update: 24th June 2016, 15:09 – What Our Fund Manager Partners Say
We have gathered the views of our fund manager partners. Overall, bringing all these views together, it can be seen thatthe UK leaving the European Union has come as a shock to our fund managers, however, this has been a very well diarised event and they have all been modelling and stress-testing their portfolios ahead of today’s result. Furthermore, both Governments and Central Banks have all had time to formulate their own strategies to deal with today’s events.
All of the fund managers believe in a diversified approach helping to guide investors through the current turmoil. Multi-asset portfolios contain a mixture of instruments that perform well in differing market conditions, which help to spread risk and protect returns for investors. All of our fund managers do not see a recessionary scenario and the key message, although currently an uncomfortable one, is not to panic and sit tight, these are portfolios designed for long-term wealth creation and the reduction of risk due to short-term shocks.
7IM
“By using multi-asset investments and by having a fully diversified portfolio in terms of fixed interest and currency helps in times of stress such as today. We have been stress testing the funds before today and our currency and fixed interest positioning has helped negate some of the falls in equity markets.”
Allianz
“Given the leave vote in the UK EU Referendum, we expect weakness to be concentrated in UK assets. Undoubtedly, this will impact our Multi Asset portfolios, either directly via our UK asset holdings or through contagion effects stemming from foreign markets. However, we have always believed in the long term benefits of international diversification, hence our portfolios are in a position to weather domestic and external shocks better than those that are more UK centric. The True Potential Fund range managed by Allianz has always taken a more global approach to asset allocation, which should help the funds cope with the short term volatility we anticipate as a result of the leave vote.”
Close Brothers
“With significant volatility in markets and currencies, we are watching for opportunities to add to our favoured long-term positions on weakness, and are closely monitoring the broader short and medium term impact of the referendum outcome. As the situation develops, our outlook will evolve based on the impact on European political stability, the future progress of UK trade negotiations and the impact on broader global growth.”
Schroders
“Although we were more hawkish on this vote than most, we were as surprised as everyone else about the result. We have a cautiously positioned set of funds that have demonstrated good resilience in markets such as these and we expect that we will again weather the storm.”
Columbia Threadneedle
“The outlook for European risk assets is clouded. We see a hit to UK growth in the short as well as medium-term, and this economic loss emanating from the UK will impact the nascent economic recovery seen across the continent. But valuations will be hit hardest by the profound uncertainty as to the prospects of political contagion rather than any immediate impact to company bottom lines. Rarely are risk events so well diarised. This has not helped markets price what looks this morning to be the ultimate outcome, but it has helped central bank prepare contingency plans and we anticipate that they will be there to provide copious liquidity if required.”
SEI
“The U.K. has decided to leave the European Union. As expected, the market reacted negatively and we expect a lengthy transition period. Despite this backdrop, we believe now is not a time to panic; we believe our diversified approach should serve investors well, and we remain diligent in evaluating future investment opportunities as financial markets react to the news.”
Update: 24th June 2016, 09:21 – EU Referendum Shock Result
Our Deputy Chief Investment Officer, Chris Leyland, gathers the thoughts of our fund manager partners in the wake of a vote in favour of leaving the EU.
The vote for the UK to remain or leave the European Union took place yesterday and at exactly 6:00am this morning the results were confirmed. The UK will leave the European Union.
Late last week and all through this week, sentiment shifted with the remain camp gaining more and more traction and opinion polls moving towards staying in the European Union. Markets gained over this period with movements from 16th June until the 23rd June (yesterday) for UK and European equities up +6.51%* and +7.19%* respectively.
Today, this has reversed and as I write this we are seeing the following movements in markets:
UK equities have fallen 4.81%*
European Equities have fallen 8.28%*
GBP has weakened against US Dollar by 12.1%*
GBP has weakened against the Euro by 9.6%*
Although falls of this magnitude are uncomfortable it is important to understand markets have rallied strongly on the belief we would stay in and today’s movements are unwinding some of these gains.
Where do we go from here?
Today’s results are clearly different to what markets expected. Stock markets like certainty and by opting to leave the European Union, this has opened up a level of uncertainty for investors.
At True Potential we promote long-term wealth creation. Short-term shocks will always surface as markets move through the cycle, but by taking a long-term view and investing in a wide range of assets through multi-asset investment, investors can successfully navigate through these events. Our True Potential Managed Portfolio Series offers diversification not just by geographical area and asset class, but also by fund manager style helping to mitigate the effect short-term events have on wealth levels.
*Source: Bloomberg
