Britain’s vote to leave the European Union has set in motion an unprecedented and unpredictable process that threatens turbulence and potential crisis — for Britain, for Europe and for the global economy.
No one really knows what happens now. David Cameron’s resignation means Britain is now gripped by a political crisis, as well as an economic one.
The collective imagination leads us to dark places. Politically, socially and economically the decision of the UK to leave the European Union will have huge ramifications for Ireland.
Of most immediate consequence, Britain’s vote to leave Europe sent global markets on a wild descent. Few expect that Britain’s departure from Europe will set off a full financial crisis like the one seen after the collapse of the investment banking giant Lehman Brothers in 2008.
But no one knows enough to rule that out, either. The world has never been here before.
The pound plummeted by 10 percent, reaching levels not seen since 1985 — well below the value at the worst of the 2008 financial crisis. The euro dropped nearly 4 percent.
Stock markets across Asia recoiled, with the major Japanese index, the Nikkei, down nearly 8 percent. As markets opened in Europe on Friday morning, the rout accelerated. Stocks in London were instantly down nearly 16 percent, shares in Frankfurt lost 10 percent, and the exchange in Paris was off 8 percent.
The vote to leave, a so-called Brexit, raised the prospect of sustained anxiety in the global economy as investors struggle to surmise what is happening.
Markets crave known facts and fret about variables, seeing potential risks in all unknowns.
The truth about all this political and economic speculation is that no one really knows what’s going to happen next.
Trying to move in and out of markets, to call the top and the bottom, is exceptionally difficult. And, if you get your timing wrong, this can have a damaging effect on returns.
The lesson from history is to keep your nerve at times of turbulence. But data also highlights the merits of long term investing.
The timeframe of five years is usually suggested as the minimum for stock market investment on the basis this allows investors to experience the ups and downs of a normal market cycle; though, as ever with investment, nothing is guaranteed.
If you are worried about your portfolio, want to speak to someone about whether to adjust your portfolio or have questions about anything to do with Brexit please do not hesitate to give us a call.