WJNotes

Brexit

Markets are in turmoil this morning as Great Britain has voted to leave the European Union (EU). Leaving the EU, known as Brexit, has become reality. David Cameron has said he will resign within a few months, primarily because he was a supporter of the UK remaining in the EU and called for the vote.

This is one of those events that has so many facets and is so complex that opinions about its impact are all over the place. According to Google, Brexit is everything from Nirvana to Armageddon for the UK and/or the European Union. Basically at this point, no one knows what is going to happen next, including us. Also important to remember is that this will be long, drawn-out process. Clearly voters are dissatisfied with the status quo and this was a way to vote against the establishment, as is happening in this country as well.

It was very close heading into the vote, but it did appear that remaining in the EU would win out over Brexit. This was obviously wrong, which demonstrates why we don’t bet on binary, closely split outcomes we view this as gambling, not investing. We are and have been evaluating our longer-term views about future returns and portfolio positioning, but have not identified any necessary changes. We remain positioned conservatively, based on low future returns. More importantly, our managers are reviewing the earnings potential of all their holdings in the context of Brexit. Generally, the preliminary selloff set stock markets back a couple of months, but they still are above the bottom reached Feb. 9, 2016.

Most importantly, Brexit and its resulting impacts will not change your long-term financial plan. If you would like to discuss your plan or any other issues, please contact us.

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