Preventing Drama of Brexit Becoming an Investment crisis
However sick you are of hearing the word, we really do have to talk about Brexit.
It may well be boring you rigid but we believe, as an investor, it’s not something you can afford to ignore.
At the time of writing, we’re told a no-deal is becoming increasingly likely. By the time you read this, that may well have changed, but what won’t change over the coming months is the general air of uncertainty. Look forward to a roller-coaster ride of hopes and expectations raised and dashed, and raised again as negotiations continue and details are thrashed out.
Even if Brexit ceases to be a problem, there are other – perhaps even more serious - issues at play, which are having a destabilising effect on the global economy. US President Donald Trump has embarked on a trade war with China, putting the world’s two largest economies at loggerheads, with repercussions for everybody. Add to that, Italy’s new government threatening the stability of the euro, Saudi Arabia, the world’s largest oil producer facing international condemnation and ongoing Russian adventurism and the world looks highly unstable.
Of course, in world politics unstable is normal, but all these uncertainties coincide with the world’s stock markets enjoying the longest bull run on record. In August the US stock market index S&P 500 chalked up 3,453 days since a significant reversal. All good things must come to an end and at the end of every bull run there has always been a significant fall in the markets. Global instability, including Brexit, can only bring that closer.
Our clients are generally in, or approaching, retirement and they cannot afford to lose too much money from their savings and investments. However, many of them, as investors can only really recall rising markets and not a crash, as the markets have been on a consistent upwards trend for almost 10 years.
Stock markets go up and down every day and every week, but here we’re talking about a significant threat.
This is why, at Reeves, we’re now making safety our number one priority. Crossing a busy road may be a necessity, but it also involves risk. If a juggernaut lorry is speeding along it, the prudent pedestrian waits until it has passed and the road is clear again until crossing. The prudent investor should adopt the same strategy.
We’re adopting and recommending a number of defensive measures to protect the value of investments. We’re increasing cash holdings and property investments. We’re also moving equity holdings into non-UK stocks and we’re holding gold, which historically does well in times of market downturn.
We’re already taking some of the steps we’ve outlined to protect their value but it’s important that our clients stay engaged. Our advice is to take stock of your situation and, if you feel uncomfortable with your current risk profile, then get in touch and discuss it with us.
There are dramatic events unfolding around the world, but we don’t need to turn a drama into a crisis.
It is important that no actions should be taken without first taking advice. Personal circumstances and an individual's appetite for risk means that the advice for one person may not be the same for everyone. The information in this blog or any response to comments should not be regarded as financial advice. Please remember that the value of your investment can go down as well as up, and may be worth less than you paid in. Information is based on our understanding at October 2018.