In the wake of the referendum results, the factors influencing the votes and predictions for the implications of the votes is being considered across the board.
Everything from too many “remain” voters stuck in the mud at Glastonbury or on holiday after university exams to rain in the South East of England keeping young voters indoors. Even the potential of voter fatigue in Scotland.
Regardless, what we do know, is that it was probably a combination of factors and quite possibly we now have a more representative sample of the UK population and a relatively strong majority voting to leave the EU – 52% vs 48%.
The ramifications of the vote will be manifold, especially in regards to investment opportunities, I have today been reviewing the following:
1. The value of Sterling vs the US Dollar has risen and the FTSE 100 Index is demonstrating a similar recovery. Longer term effects will be interesting, but as usual, events, policies, reaction are impossible to predict accurately. We could be at the start (finally) of a sustainable period of growth for the UK stock market and genuine, widespread benefits for the UK economy, and ultimately for those of the rest of Europe too.
2. Volatility will be normal for a while, but how long that ‘while’ will be, we do not know. We will see increased volatility in markets, so investors will need to remember that they are investors, not short term gamblers. The value of investments may fall and rise sharply, but over the medium to long term, we should see steady growth, with fewer pitfalls along the way.
3. The sectors most effected by the vote to leave in the UK market have been the banks (RBS, Lloyds, etc), asset managers (Aberdeen, Schroders, etc), and house builders (Persimmon, Taylor, etc).
The financials because of macro uncertainty and changing regulatory regime, UK-based asset managers because of generally weaker equity markets and potential issues selling UK unit trusts into Europe (i.e. whether OEIC ‘passporting’ stays the same), and house builders because of perceived reduction in demand.
Some of the first-look outcomes we have seen include: