The vote to exit the EU came as a shock to many, including the City which was clearly expecting a Remain vote. Many have been left contemplating what the future holds and how markets will react, especially considering that the formal negotiations to leave the EU are likely to be lengthy.
Commentators have suggested that growth is expected to slow in the short term, and as a result of the decline in sterling, inflation could be set to jump. The Bank of England has offered emergency liquidity and interest rates may
well be set to fall even further.
On a more positive note, sterling’s decline may act as a stimulus and encourage export trade as goods priced in
pounds become more affordable to foreign purchasers. The Chancellor will be reviewing and reducing Corporation Tax rates in a positive move designed to signal that the UK is still open for business.
Market volatility set to continue
It’s likely that the UK market will continue to exhibit a high degree of volatility as events unfold and the terms of departure become clear. Whilst the risks surrounding Brexit can seem immense, many commentators have said that although the UK’s departure from the EU has had a destabilising effect, they do not see it fundamentally affecting global economic recovery over the longer-term.
Diversify and review
Against this backdrop of uncertainty it’s natural for investors to feel apprehensive. When markets rise and fall on
a daily basis, it’s important to maintain a longer-term focus. To counter some of these economic uncertainties, diversification of assets is key to ensuring that you are not overly exposed to one share, sector or market. In addition, regularly reviewing your portfolio and circumstances with your adviser makes good financial sense, especially in challenging markets.
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