By now you have certainly heard the term Brexit. If
you hadn’t paid attention to the story over the past few months, it will be
shoved down your throat now with the UK voting to leave the EU yesterday.
It is now impacting everyone with the effects being felt in the global
stock markets.
I want to focus on what’s most important, how does this
impact your financial life?
Back in March you may remember we began the process of
rebalancing many of your accounts. From January through mid-February the
US stock market was down 10%. By mid-march it had pretty much come back
to square one. Rebalancing means selling some positions and buying
others. We did all of the selling of those positions in March, but, very
little of the buying. The way we handle the buying and selling is to set
a price we are willing buy or sell at, and try to be patient in letting the
market move to that price. Our feeling was that the markets will react to
something that allowed us to buy in at those lower prices. We certainly
did not know that Brexit would be what presented the opportunity, just that ups
and downs are how the markets work.
The result of this is, that in the discretionary accounts we
manage for you, we have been holding much more cash than we typically would
(this amount varies by account based on your specific risk tolerance). We
have had prices set to buy back into certain assets, today’s market movement
will certainly bring us closer to some of those prices (and we very well may
see some of the positions be bought). We have also lowered a couple of
the prices we set to buy into certain positions.
I want to be sure to emphasize that you still have a
majority of your funds invested in stocks and bonds, so you will be along for
the ride during this bumpy time. The extra cash in the account should
help balance the ride somewhat and present an opportunity to get it invested at
prices lower than they were back in March (or even yesterday). Things
could certainly continue down from here (we’ve all been through that before –
remember, stairs up and elevator down). Stock markets hate uncertainty, and
how the UK and EU will handle the impact of this change brings plenty of
uncertainty.
I’ll let the talking heads debate just how big of an impact
Brexit will have on the global economy. We will remain focused on
ensuring that you have the correct amount of risk in your portfolio, and that
we are using opportunities of market volatility to rebalance back to that risk.
If you want to educate yourself more on Brexit here is a
link to today’s WSJ article.
If you have any questions, we are here.
