Today it was announced that the UK has voted to leave the European Union. Since the announcement Mark Carney, the governor of the Bank of England, has promised £259 billion to calm the markets and David Cameron has said he will step down as UK Prime Minister and Conservative Party Leader.
The decision to leave the European Union has sparked volatility across asset classes. The currency market is showing the highest movements and the Pound hit lows not seen since 1985.
It is unnerving to see how the volatility is impacting your investments but Moneyfarm portfolios are well positioned to manage the risk currently in the market. Our Asset Allocation team have worked hard to create portfolios that could cope with either eventuality. The rebalance we carried out last week ensured that we minimise the risk presented by Brexit.
Our asset allocation is conservative with the aim of helping contain absolute loss. The most risky assets are currently UK and European equity and our allocation to these is limited. We anticipate that European and UK equity will be the most volatile in the coming days. This morning EuroStoxx has dropped by 8% whilst the UK’s FTSE 100 has fallen by 9%.
2016 has held many risky events, with the US election still to come. As such our portfolios are cash rich which gives us a degree of flexibility. We are able to quickly act upon market reaction if we see opportunities that will continue to protect capital.
Our portfolios are well diversified, this is a core element of Moneyfarm’s investment strategy and ensures we protect our customers from the risk of one asset class. We have alternative drivers of performance within our portfolios such as High Yield Corporate Bonds and Government Bonds.
Whilst the knee-jerk reactions will continue to make headlines, history has shown that maintaining a long-term perspective is the key to investment success. Moments of volatility like this are often short lived and we will continue to monitor the markets in case opportunities arise.
As always, we will maintain a long-term perspective and not be drawn into the current hysteria. A true multi-asset solution will help to protect capital and drive long term returns in the future.
If you have any questions or would like to discuss the impact of Brexit on investments with one of our investment consultants, please call us on 0800 433 4574.