Amid Brexit, keep investments diverse

By Mark Eshman July 6, 2016 In the News

As one would expect, global markets’ initial reaction to the Brexit vote has been negative. Some of the sell-off is due to investors unwinding positions as they had anticipated “Remain” winning. Most is simply fear of the unknown. We’ve seen this movie before, markets abhor uncertainty.

While plenty of drama surrounded the June 23rd vote, it’s critical to note:

“Brexit” is not a date in time, it’s a process.  It will take years, not hours or weeks, to play out.

There are two messages we’d encourage investors to consider:

1) knee-jerk investment decisions during periods of high market volatility are almost always a bad idea; and

2) broad diversification can be the best long-term protection for enduring these events.

Ultimately, global economies are merely a reflection of its individual citizens.

The U.K. existed successfully long before the creation of the E.U. With the exception of Germany, they have been the strongest economy in the E.U. since inception. Something tells us that in the medium and longer term, its citizens will continue to create and purchase goods and services and grow their economy. Other non-E.U. countries like Norway and Switzerland have executed agreements with the E.U. on both trade and labor mobility, so Brexit doesn’t necessarily mean U.K.-E.U. trade comes to a screeching halt.

In the U.S., the dollar is likely to strengthen against the euro and British pound, which makes U.S. goods more expensive for Europe. On the other hand, as the U.S. dollar strengthens, European goods will become cheaper in the U.S. For Idaho businesses, this is an encouraging sign as lower input costs can help them stay competitive in global markets.

International trade supported 195,537 jobs in Idaho in 2013—more than one in five. As more opportunities arise in the global economy, this number could increase. In fact, trade-related jobs grew three times faster than total employment in Idaho from 2004-2013. As the E.U., U.K. and the U.S. review trade and international business policies following Brexit, we may see a change in the way European countries trade and conduct business in the U.S.

Economists and experts abound, but no one can predict with certainty what will happen. What we do know is that markets and economic development are incredibly global, and the world will continue to surprise us. We reiterate the importance of staying diversified in your investments and sticking to your long-term investment plan.

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