On 23rd June 2016 Britain voted to leave the European Union – you may have read about it.
The historic vote triggered a plethora of debate and opinion with many experts rushing to have their say on what this could mean for our markets, economy and, more importantly, the money in our pockets. It is easy to get caught up in all of the noise, so we thought we would summarise what has happened since that historic day last year. So, what do we know so far?
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Many people predicted that a ‘Leave’ vote would trigger a crash in the financial markets, however what we have seen has been quite the opposite. Indeed, from 24th June 2016 to 31st December 2016 the FTSE 100 grew by 14.64%* and the FTSE All-Share, which comprises over 600 UK companies, grew by 13.10%*.
At the beginning of this year the FTSE 100’s closing price hit record highs on twelve consecutive days, reaching an all-time high of 7,337 points on 13th January 2017.
However, rather than being a sign of a booming economy this has been largely attributed to the weakening of Pound Sterling since the vote.
Many experts and financial commentators are predicting that this is a bubble waiting to burst and a market ‘correction’ could ensue at any moment. This is why we are currently holding high levels of cash within our portfolios; taking profits ‘off the table’ from the recent market surges, reducing potential losses in the event of a market downturn and preparing for the investment opportunities that may follow.
Although, as somebody infamously said in the run up to the Referendum: “We’ve had enough of experts…”
As with the markets, many of the economic predictions made since the leave vote haven’t yet come to fruition. Many economists predicted that the ‘Leave’ vote would have a negative impact on the UK economy and consumer confidence, but what we have seen has been a different story.
Latest figures show that in the immediate wake of the Referendum – between July and September 2016 – the economy grew by 0.6%, faster than previous estimates.
The Office for National Statistics also showed an increased level of consumer spending on the high street up to the end of December.
However, the Office for Budget Responsibility has recently downgraded its growth forecast for the UK economy for 2017 to 1.4% from 2.2%. We also saw a sharp drop in the pound immediately after the Referendum and it went on to fall to a three-year low against the Euro; falling from the pre-referendum rate of 1.30 euros to a low of 1.09 euros in October 2016.
Whilst the initial impact of the Brexit vote hasn’t been as negative or severe as many predicted, it is still too early to accurately predict what the full consequences will be, particularly until we know the full terms of the deal to leave the EU.
The recent ruling that the triggering of Article 50 must be put to a Parliament vote has only added further uncertainty to the whole process and, as our Prime Minister recently put it, we expect plenty of “bumps in the road” over the coming months and years.
This is unprecedented territory we are in and each day seems to bring new levels of uncertainty, so we continue to work closely with our various investment and research partners to determine the best course of action for our portfolios and prepare for choppy waters ahead.
Please continue to visit our website for further Brexit updates over the coming months, or if you would like to discuss the positioning of your investment portfolio with your Adviser then please do not hesitate to get in touch.