FANews
FANews
RELATED CATEGORIES
Category Investments

Staying calm in the face of uncertainty

27 June 2016 Alex Cook, GCI Asset Management
Alex Cook, Chief Executive of GCI Asset Management.

Alex Cook, Chief Executive of GCI Asset Management.

During the course of Thursday 23 June, the British public voted to exit the European Union. Although the voting was fairly close, 52% vs 48%, the impact of this decision will impact the UK significantly.

What does this mean for the UK?

Firstly, the UK are still part of the EU, until they are no longer officially a member. Current Prime Minister, David Cameron, has indicated that he will step down in the next 3 months, and will leave any negotiations to his successor. Cameron was in favour of remaining in the EU and therefore sees the need for fresh insights in the coming negotiations. As soon as his successor triggers Article 50 of the Lisbon treaty, the separation from the EU will officially start. Comments from EU leaders are that they would like to see this process happen as quickly as possible. The process of negotiating the exit will most likely not be a quick one, but needs to happen as soon as possible, to avoid any lingering uncertainty.

How does this affect the EU?

There have been calls by Scotland, Ireland, France, Italy and the Netherlands for similar votes. Scotland and Ireland mainly because they would then like to leave the UK and re-join the EU, and by France, Italy and the Netherlands to vote in favour of also leaving the EU. Clearly this creates massive uncertainty within the EU, and this is an issue that EU president, Donald Tusk, will have to address as soon as possible. The possibility of other countries leaving the EU is on the cards, and cannot be ignored.

The impact

At present global markets are in turmoil. The pound is at levels last seen in 1985, Emerging markets are being sold off heavily, and major European stock markets are all down in excess of 5%. The uncertainty of what will happen next is no doubt driving market fears, and in many cases exaggerating the possible effects of Brexit. The fact that most market commentators had expected the UK to remain in the EU, has an influence as well. The JSE was at one point down in excess of 4%, with only the Gold Index up for the day, no doubt feeding of the rush to gold as a safe haven.

What to do?

In times of massive market fear, the most unwise route to take is to panic. Naturally this is more difficult than it may sound, but making a rash decision when markets are this volatile, can have a significant long term effect on your portfolio. The massive sell-down in markets today will no doubt leave investors fearful, but it can pay to take a step back and assess the merits of your current positioning, and the influence of the UK vote going forward. Selling down into the current market turmoil will only lock in losses, and in instances like this the value of a well-diversified portfolio will come to the fore. We will continue to monitor the situation and unsure that you, our client, are informed timeously.

Quick Polls

QUESTION

South Africa went to Davos to pitch itself as an investor-friendly destination, then signed an Expropriation Act. What message does this send to global investors?

ANSWER

Invest at your peril
SA is open for business
Two steps forward, one land grab back
Welcome to Hotel California
fanews magazine
FAnews February 2025 Get the latest issue of FAnews

This month's headlines

Unseen risks: insuring against the impact of AI gone wrong
Machine vs human: finding the balance
Is embedded insurance the end of traditional broker channels?
Client aspirations take centre stage as advisers rethink retirement planning
Maximise TFSA contributions before year-end
Subscribe now