Brexit aftermath

Rather than have a knee jerk reaction to the EU Referendum we felt it was important to see how the market closed on Friday and establish how each market reacted to the vote and comment accordingly. As we wrote in our article last month, we always invest clients' monies in a diverse portfolio of varying asset classes to ensure clients' portfolios are not correlated to one specific market.

On Friday we saw a sharp drop of over 8% in the FTSE100 which saw many market commentators stating that the fall was unprecedented and Armageddon was approaching which makes great news, however many of the losses were recovered by the time the market closed resulting in a total loss of 2.5% by the end of the day. European stocks however were the hardest hit with the Spanish and Italian indices dropping by over 10% throughout the day.

All portfolios that Harding monitor are well diversified and are invested in asset classes such as Global Equities, Fixed Interest, UK Equities, Property and Absolute Return Funds. Even though European stocks and UK stocks may have taken a short term hit, the economic fundamentals of the UK are still relatively strong, such as low unemployment and real wage growth. European Equities are still relatively cheap.

The outlook at the beginning of the year was relatively bleak for Fixed Interest however we retained a relatively high exposure and complimented this asset class with Absolute Return funds; to hedge against downside movement in the equity markets.

On Friday only 11 of 39 sectors performed negatively whilst North American equities, Asian equities, Global Equities and Government Bond sectors all rose by over 4% in one day. This highlights the benefit of diversification during times of volatility.

There are still a number of unknowns such as; who our Prime Minister is going to be, when we are going invoke Article 50 and how we are going to extract ourselves from the EU. Therefore what is certain, is that we will continue to see volatility in the markets for months to come. Volatility can present opportunities and so over the following months actively managed funds should be in a strong position to take advantage of these. Harding's core investment proposition is based on using actively managed funds, this means that the fund managers can make tactical decisions.

If you have any questions about how Brexit affects your individual portfolios, please do not hesitate to contact your adviser on 01483 80 20 10.