Well, They Left - Britain Votes to leave EU

Great Britain’s (or the UK) vote to leave the European Union (EU) yesterday is not the end of the story, but only the beginning.  Now starts a 2-year process of negotiations between the UK and the EU to discuss trade, tariffs, and movement of goods, services, and people across borders.  The UK has to do the same with other trading partners.
 
During this time, the UK will trade with the EU and the world as a full member of the EU, just as before. As a result, any fear of recession does not result from a sudden end to trade, but rather from the potential for companies and individuals to change their plans with regard to investment and purchases due to the uncertainty of how this all turns out.
 
One distant possibility is that the UK “exit” could be reversed.  Britain’s parliament is ultimately responsible for the decision, and the margin of victory was narrow.  It is possible that, once the UK renegotiates the terms for trading with the EU, the parliament moves for a second referendum – this time giving voters clarity about what they are voting for.
 
As seen in today’s markets, the “exit” result was unexpected and has led to increased volatility.  While the British Pound is being hit harder than the Euro, the outlook for British companies seems brighter than that of their German and French counterparts, based on the performance of their respective stock markets.  The impact is being felt elsewhere as well, with stock prices falling globally.
 
Yesterday there was a significant chance that things would stay the same. Today, it is 100% certain that things are different, but nobody know just how different.  How will the trade negotiations turn out?  How will other EU members respond? How will this impact the global economy?  The outlook is uncertain.
 
For our part, we currently don't anticipate making significant portfolio changes and, where we use mutual funds, are letting the managers themselves take advantage of the volatility as they seek to reallocate money where they see opportunity.  In addition, most of our clients have a constant exposure to investments like real-estate or reinsurance which have little or no relation to stock market movements, which should help on days like today.