What does “Brexit” mean for you?

The decision made by voters in the United Kingdom (UK) at the end of June to leave the European Union (EU) – known as “Brexit” – had an immediate and momentous impact on financial markets across the globe.  The UK leaving the EU is one of the most significant political events in recent years, and has implications for the UK and European economics as well as the broader global economy.

As widely predicted, “Brexit” has increased uncertainty of the UK’s economic future and also that for Europe more generally.  As we know, financial markets do not like uncertainty and this was reflected in the immediate falls and increased volatility in stock markets and currencies around the globe, including Australia’s financial markets.

Despite recent rallies in markets, in the short-term the increased uncertainty and volatility may have a negative effect on the value of your investments.  Over the longer-term it is more difficult to predict how Brexit will continue to shape financial markets as it is not clear in what way it will affect economies in the future.  The main risks relate to contagion and the impact Brexit could have on the European growth situation, which is already very delicate.  In the longer term, the UK economy is dynamic enough to weather the changes, but the risk of a recession is real, including the potential for a vicious cycle of economic stagnation, further weakening Europe’s economies.

Your best defence against this uncertainty is to have a clearly defined, well-rounded and long-term investment strategy.  A key aspect of an investment strategy is to consider the diversification of your investment assets.  Diversification of your retirement savings across different assets and regions is a key in protecting from volatile financial markets over the long-term.

While it is important to keep track of events that affect financial markets and your investment and superannuation savings, it is also important to remember that your investments are for the long-term and that sometimes, short-term decisions can do more harm than good.  A good investment strategy that keeps us disciplined and focused on the long-term is essential.

If you want to take the opportunity to discuss your investment strategy more broadly, please feel free to give us a call to arrange a time to meet so that we can discuss your particular requirements in more detail.

Stephen Garrett & Michael Hiscock
Directors