The Brexit was the answer to this ongoing question
From the very beginning of 2016 we have been asked, “Why are you staying so conservative in our portfolios?” “Why have you raised so much cash?” On this past Friday you received the answer. The Brexit hit the US markets hard but here at Fi Plan Partners we were able to stay on top of it for our clients. There are no guarantees in investing but we are constantly watching the markets and what is going on in the economy that could affect our clients. We believe the Brexit is a symptom of a bigger problem.
The Brexit on Friday caught many people off guard. The markets did not have it priced in and our markets do not like surprises. The world equities markets lost 2 trillion dollars. That is the worst day in history for global markets. Now the concern is the contagion. Will other countries follow Great Britain? All this will play out over the next couple of months.
The Brexit is not a done deal
Over the weekend we saw many people who voted to leave the EU are now saying, “Oh my gosh! What have we done?” It’s important to remember that the Brexit is not a done deal because the British Parliament still has to vote on it. The news media has not emphasized that the Brexit vote was just a referendum and the Parliament still has to approve it. It could be a 2 year process if the EU even allows it.
We didn’t predict the Brexit impact but…
We don’t claim to have predicted the Brexit. The reason we have been conservative in our portfolios is not because of the Brexit but what the Brexit shows us. The Brexit shows us it is only a symptom of a bigger problem.
The Brexit points to an overall sickness of global frustration. The Brexit shows people are frustrated with the current state of the world. This has caused the unconventional to be popular. This is why we are seeing the popularity of US presidential candidates like Donald Trump and Bernie Sanders. The Brexit is just one symptom of a bigger problem. We could see many more symptoms down the road. This is why we will continue to stay conservative.
Is this a good time to jump into the markets?
We like the saying, “Buy low and sell high” providing you have the cash to buy when prices are low. It still may not be the time to jump in just yet. We believe the Brexit is just the beginning of what is a frustrating process and what can be viewed as the populace revolting. It could create various opportunities for investors down the road but there are no guarantees. While the markets traded back on Friday with the Brexit news, they are only at the level we saw back in May. This is not played out all the way yet. There is an unraveling process that has to take place. Opportunities might not present themselves right away.
The Brexit impact on the US economy
While the dollar has gained strength from the Brexit impact, that is only good for the person going over to England to buy with the dollar. The reality is that it makes it harder to sell US products. It’s been a hard sell all year but now the forecast from many economist is that the Brexit will have a .25% impact on our GDP. The majority of that impact is on selling to Europe and European purchasers are now more uncertain about buying US products. This hurts US companies who sell to Britain and the rest of Europe.
The competitive currency market
Central banks are trying to flood their markets with liquidity to push their currencies down. With a weaker currency, it’s easier to export products. The US is the only country that is trying to do the opposite. Japan and Europe are trying to make their products cheeper to the US consumer which is the largest consumer group in the world. This accelerates this competitive currency market where central banks are trying to combat what the markets are doing. It’s going to get interesting because it is going to take time to roll out measures to fight the current currency situation.
We are staying conservative
We are staying conservative and on top of what is going on in the global and US economy. Please let us know if you have any questions concerning your portfolio or the Brexit impact on you.
[contact-form-7 id=”8119″ title=”Portfolio Team Blog Comment Form 2015”]
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.