June 2016 – Brexit Commentary

Posted by on Jun 24, 2016 in MFA Insights

Brexit Commentary

The “Brexit” vote has already had an immediate short term impact on global stock markets largely because speculators had positioned themselves on Monday for the opposite outcome – for the UK to remain in the EU.  Fortunately for us, we invest with goals set for the long term so we are less concerned by the short term gyrations of the markets than say currency and day traders whose short term speculation hopes to capitalize on such movements.

What does matter is if this vote will change the complexion of the global stock market for the intermediate to long term or will it be another blip of expected volatility that accompanies growth assets?  We have seen this movie before in similar concerns such as the aftermath of 9/11 terrorist attacks in 2001, the US invasion of Iraq in 2003, and when Greece defaulted on its debt in 2012.
We continue to recommend to ‘stay the course’ because we know we cannot reliably predict such events.  Although we may sound like a thoughtless broken record, in fact our patience and persistence is born of experience and research, not a lack of creativity.
The best evidence is to look at the five year chart of your own investment experience and then ask yourself if you think Brexit will be a major topic five years from today.  It may or may not be.  Even if it is, predicting how that will play out and how we could benefit from that is very tricky.  Changes based on such guesses are very likely to increase idiosyncratic risks without increasing returns.
We have read quite a bit about Brexit and found this article sent out today by Vanguard to be quite thoughtful as well as mercifully short and concise:
Please reach out to us about any concerns you may have with respect to your portfolio or financial plan.


Dave and Tim