24 Jun 2016
European Union, which has been increasingly weighed down by its failures to deal fully with a succession of crises, from the financial collapse of 2008 to a resurgent Russia and the massive influx of migrants last year.
At the time of writing, Prime Minister David Cameron has resigned and he will be replaced in October 2016. The British withdrawal process is expected to be complex and may take up to two years which is within the European Union’s governing treaty for exiting members.
Financial markets, which had been anticipating that Britain would vote to stay in, reacted negatively on today's outcome. Against the US dollar, the value of the British pound fell by about 10%, the Euro fell by about 4% and the Australian dollar by 3%. The Australian market closed down 3.1% today and the indications are that markets in the US and Europe will fall by at least 4% on open.
Given the likely volatility in financial markets following the vote, it is important to remember that all investments in our portfolios are financially very sound and should be able to weather the storm caused by Brexit without any major issues. In addition, a weakening Australian dollar provides some protection to the value of our international equity investments which are unhedged.
Events like these normally present opportunities in financial markets and we will keep a close eye on developments over the next few days and weeks. Although we do not foresee any wholesale changes to the investment portfolios, we may reposition the portfolios somewhat to benefit from changes in market conditions.
Please do not hesitate to call or email your adviser should you have questions.