The Markets
Today marks a week since the announcement of the EU Referendum results and it has been an eventful one. With scaremongering coming from the media, many investors may have expected to have seen significant drops in markets, but actually the opposite was the case.
If we look at UK markets, specifically the FTSE 100, it is now ahead of the pre-Brexit level by 2.9% and year to date it is up 4.4%*.
*Source:Bloomberg
Why is This Happening?
It is important to remember that the European Union Referendum was a highly anticipated event. Governments and our fund manager partners all knew that the vote was to take place and that there was a possibility that the UK could end up leaving the European Union. This foresight meant that they could, and have, all planned ahead to deal with navigating through this event.
For Governments, and more importantly Central Banks, this means they have been planning on how to stimulate the economy for many months now. The Bank of England has put aside £250 billion and are now considering cutting the UK Base Rate, should they need to shore up markets and UK growth, but this hasn’t been necessary so far. This preparation is not limited to the UK. Throughout the World, Central Banks are looking at what they can do to positively affect global growth.
What Has Happened with Our Portfolios and Funds This Week?
The True Potential Managed Portfolio Series and Wealth Strategy Funds have all posted strong positive returns over the period. At True Potential, we use multi-asset investments rather than investing in one single area. This means spreading money across different geographical areas not just the UK, across different asset classes and different currencies.
For a UK based client, investing Overseas there are two elements of return, the movement in the asset class itself and also the gain or loss from the currency movement. On Friday during the Brexit vote Overseas markets weakened but the currency movement helped to provide positive returns for many investors.
This is an example of diversification in action, with global investment and currency movement shoring up returns for investors.
What Will Happen Moving Forward?
Markets this week have brushed aside media and politically induced worries and are concentrating on solid investment-led fundamentals.
True Potential are in constant contact with our global fund manager partners and conversations have identified positive growth as a key theme, moving forward. Volatile markets, although uncomfortable for investors, offer opportunities for fund managers to buy assets at favourable prices. Global Central Banks are committed to providing liquidity and this could be seen through monetary stimulus over the year.
Within the UK, the next step is a plan to be formulated as to how the country moves forward and we maintain a close watching brief on markets. We’ll endeavour to keep you informed of how things progress.
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