FEIFA Board Member and Blacktower Group Managing Director
Brexit: a disaster or something far less worrying?
The British electorate has given its verdict on the UK’s membership of the European Union in no uncertain terms but, in spite of some emotional appeals to the contrary, this is not a disaster.
It is worth remembering that on the 20th February 2016, when David Cameron announced that the EU referendum would take place, the FTSE 100 index was at 5950, the 10 year Gilt yield stood at 1.41% and the sterling/dollar exchange rate was 1.44. At lunchtime on Friday June 24th the FTSE 100 was trading at 6060, the 10 year gilt yield is 1.07% and the dollar exchange rate is 1.37. On the face of these numbers you could be forgiven for not knowing what took place in those fateful 24 hours near the end of June.
In my judgement, the financial system is capable of absorbing this shock, but investment portfolios will certainly not be immune from some impact. A period of heightened volatility is inevitable until the politics of the separation process become clearer but weak sterling will benefit the UK stock market due to companies earning most of their profits from abroad.
In the midst of the maelstrom, two factors suggest that the turbulence may pass sooner rather than later. First, growth fears should not...