We thought we take a one-week break from our estate planning series and cover Brexit. It’s far too big of an event to ignore – it’s been on the minds of investors worldwide.
When David Cameron was elected he made two major promises among others: he’d hold a Scottish referendum and a referendum on whether the UK would remain in the EU. He put the fate of the UK squarely in the hands of voters. While Cameron breathed a sigh of relief when Scotland voted to remain with the UK, he wasn’t so lucky with the second referendum and arguably the more important referendum.
On June 23, 2016, in a historic vote, the UK voted in favour of a British exit (or “Brexit” as the media has dubbed it). This totally caught everyone by surprise. There were two campaign sides – the Remain side, who wanted to stay in the EU and the Leave side, who wanted to exit from the EU. If you watched media reports leading up to Brexit, although the polling was close, chances were pretty good the Remain side would come out ahead.
The Leave Side Prevails
The problem is the polls got it wrong. Voters usually fear uncertainty. For example, in the Scottish referendum, despite the polls saying it was close, the side that wanted to stay in the UK surged ahead on voting day. This didn’t happen with the Brexit vote; in fact, the opposite happened. The Leave side went ahead when it came time for the British to cast their ballots. Immigration and the UK keeping its sovereignty weighed heavily on the minds of voters. Overall, the Leave side got 51.9 percent of the vote, while the Remain side only got 48.1 percent.
The Brexit results were polarizing. While Scotland, Northern Ireland and the city of London voted to stay, all other parts of the UK voted to go. Older voters supported the Leave side, while younger voters, the ones that have to live with the Brexit decision the longest, voted for the Remain side (although, oddly enough for such an important vote, voter turnout was low for younger voters). This has left the UK deeply divided. The Scottish aren’t shy about voicing their displeasure with the vote results, promising to hold another referendum on independence in the not too distant future.
This certainly isn’t the outcome Cameron wanted. In fact, it led to his resignation as prime minister of the UK. This has left a lot of questions unanswered surrounding the British economy. Investors don’t like surprises – to say Brexit was a surprise would be an understatement. Markets plunged worldwide into a sea of red in response to the vote results.
What Should Investors Do?
As an investor, it’s important not to panic from the Brexit vote. If you’re invested for a long-term goal like retirement, stay the course. The last thing you want to do is “sell low, buy high,” by cashing out your investments and putting it all in cash. The good news is the markets have largely recovered since the Brexit vote. With the British pound hitting a 30-year low, if you’re planning a vacation this year, it’s never been more affordable to visit the UK.
If you’re unsure about whether your investment portfolio is prepared for the next surprise in the markets, feel free to contact our office. We can take a closer look at your investments to see if you’re well positioned.
Next week we’ll revisit our estate planning series, covering powers of attorney.
