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.
This material has been provided for general informational purposes only and should not be considered as investment advice or as a recommendation. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from ClearRock Capital, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available for review upon request.