Andrew Wilson, head of investment at Towry, the wealth manager, said: “For investors there is little short-term good that can come from all this, as the Brexit vote is going to cause excess volatility and increased risk premia. What we will now see is the massive unwinding of positions and hedges that were placed around this event, although these will no doubt be built up again around the forthcoming US elections. Increased volatility also means an increased chance for active portfolio managers to prove their worth by making good decisions that materially benefit the investments of their clients.
“As we look forward, a wider risk is that an anti-globalisation and anti-internationalism trend takes hold, as this will further push a policy prescription of protectionism and increased trade barriers. Fundamentally, the more difficult it becomes to move capital, goods, people and jobs around the world, then the less easy it will be to grow invested wealth, the more chance that standards of living drop rather than rise, and actually the tougher it is to be a smaller or specialised political entity.
“Whilst everyone will be monitoring closely, no one knows with any great certainty how markets will react to Brexit – not over one day, one week or one year. Indeed the initial move after an exogenous event often turns out to be the wrong one, and for all those with precise forecasts, it is usually better to travel than to arrive. An already properly diversified investor should be able to select which battle they want to fight, in markets that are liable to be emotional, irrational, and driven by anything other than fundamentals.
“As ever, history would suggest that investors should try not to panic, and instead stick to their long term plans. If they also have diversified and regularly rebalanced portfolios, then it would be highly unusual to experience inferior performance, over time, and, on the contrary, good decisions even in the most volatile of markets can materially improve the outcome.”
A LANDMARK POST-REFERENDUM EVENT
IFA Magazine’s Brexit coverage is supported by Old Mutual Global Investors. Join them on Tuesday 28 June at 9.30am when Mishal Husain talks to Richard Buxton and team in a LIVE video interview. Register now.