Click the image below to watch Gary Neild’s commentary from today’s Brexit news!
Good day everyone.
Well, what a few days it’s been. First we have the Brexit and then England’s capitulation in the football. One was unexpected, the other was sadly predictable.
I’m not going to talk any more about the football and so let’s move on to the fallout from the Brexit vote.
As we know markets hate uncertainty, but of course, traders love it! It’s a perfect storm at the moment with no leadership within Government and no credible opposition. The 24 hour news heightens the angst. Chaos has unfolded but, let’s be clear, this isn’t a Lehman’s moment.
So what do we do. The message is don’t panic. In the global crisis of 2008, money stopped flowing around the system. Most institutions were caught unawares. The EU referendum, however, was a predetermined event and as Mark Carney, the Governor of the Bank of England has stated, they had to prepare for both outcomes. Although the fallout is disconcerting, compared with 2008, we are on the front foot.
Safe haven assets such as Gilts and Gold, etc. have spiked as traders have fled away from riskier assets such as shares. The FTSE 100 has proved resilient so far. Whilst the index fell by -5.62% in two days, it is currently up +2.83% today as I speak. The Eurostoxx index however didn’t fare so well on the Brexit vote had its biggest one day fall since 2008 on fears over the breakup of the EU. The Spanish election result has calmed the nerves somewhat.
Tactically, with regards to our active portfolios, we had two switches arranged, one if we came out and one if we remained. Despite the expectation of a ‘remain’ vote, we effectively moved our active portfolios into what we called a neutral stance a few weeks before the referendum. The portfolios rode the volatility really well leading up to the vote. Our inclusion of 7IM came into its own as they created tactical positions such as hedging circa 50% of their funds against Sterling. They also bought more US Treasuries. Great adjustments as we have since found out.
The day of the result, we exercised the option to switch the portfolios into defensive positions. Gold, Government Gilts, Global Bonds and cash. We shouldn’t be complacent with this defensive stance. There is the danger of asset bubbles forming and what historically may be perceived as safe assets are likely to demonstrate volatility. We will rebalance the portfolios when we believe it is appropriate.
Our role is to steer your investments and pensions through this turmoil. As usual we are on the case. It is at times like this that we all begin to understand what risk really means. It can be difficult to separate the fundamentals from the emotion but unlike the England football team, Blue Sky can be relied upon in the heat of the moment. We’re with you every step of the way.
All the best
Gary
