Brexit & your portfolio

With the current Brexit debates, the immediate future is very unknown. But what does this mean for your portfolio?

The future is always unknown. However, currently it feels like the immediate future is even more unknown that usual. Currently we don’t know whether we will exit the UK with the withdrawal agreement in place, no deal or some other deal. According to some people, there is a small chance that we may not exit at all. Will there be a general election? If Jeremy Corbyn gets into power, what direction would he take the country in? If we have no deal, what does that mean for the UK in real terms?

This lack of knowledge is leading to large uncertainty in the stock market. In the last 6 months, the stock market has dropped over 8% and it continues to bounce around. My personal view is that it will continue to bounce around until businesses have a bit more certainty about the climate they will be operating within post March 2019.

All a bit scary, but the fact is that we cannot control the final Brexit outcome, nor can we control the reaction of financial markets. In running portfolios, we need to focus on what we can control…

1. Global Diversification – we focus on investing your portfolio across different global markets. This reduces the risk attached to any one market. The UK makes up around 6% of world equity markets in terms of capitalisation. This reduces your exposure to UK specific market risks.
2. Owning short dated, high quality bonds – by owning a diversified mix of short dated, high quality bonds we reduce the volatility of your portfolio as well as the chance of the capital value of the bonds moving too much. This helps protect against the potential rise in UK bond yields (and subsequent fall in bond prices).
3. Sticking to the strategy – for most of our clients, we are investing for decades rather than years. Although uncomfortable in the short term, Geopolitical events and market volatility tends to have less of an impact in the long-term. In fact, over long-term, the biggest risk to your future is likely to be inflation. The strategy we design and manage is in place to battle this biggest risk.

Times like this can be unsettling; but we work with you to make sure your portfolio can withstand these short-term uncertainties. It can be difficult to avoid watching the news or hearing negative things about Brexit but try to keep things in perspective and remember how strong the UK economy is.

Lastly, have faith in the structure of your portfolio to deliver on the goals that are important to you. If you want to discuss anything, please do let me know.

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Past performance is not a reliable indicator of future results.