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Restating Financial Results
By Jeffrey J. Powell, Managing Partner, Polaris Greystone Financial Group
The British have voted to leave the European Union (EU). This has come as a bit of a surprise because prior
to the vote most polls were showing that the British would elect to stay in the EU, albeit by a narrow margin. Obviously the polls were wrong and the world’s reaction has been undoubtedly negative. The British pound dropped 8.28 percent and the euro dropped 2.29 percent against the U.S. dollar overnight. As of June 24, the world’s broad-based (stock market) indexes have also been dropping:
There is no easy answer to give because we are in unchartered waters. Many fear that Brexit will push the British economy and the EU economy into a recession. If this were to happen, the additional fear is that their recessions would pull the rest of the global economies down. Others fear that this will lead to more countries leaving the EU, a domino effect that could further destabilize the region. The reality is that no one knows for certain what the political or economic impact will be as a result of the Brexit decision. Be assured that our wealth management advisors are closely monitoring the situation.
Some of the impacts are already being felt. British Prime Minister David Cameron was strongly opposed to leaving the EU. As a result of the vote he is stepping down as Prime Minister (by October). While not legally binding, Cameron will most likely invoke Article 50 of the Lisbon Treaty, which will begin the legal process for leaving the EU. Cameron’s wishes are to turn over this process to the Brexit leadership to carry out the unwinding process.
Leaving the EU will not be an easy process, as Britain will have to disentangle itself from the EU structures to which it belongs. It’s estimated that it will take the British at least two years to officially leave the EU. During this time they will have to renegotiate trade agreements, immigration agreements, and 80,000 pages of other EU agreements. Even if the British want to move quickly to find their complete sovereignty, it is going to be a long, drawn out process.
Uncertainty brews volatility in the markets. Volatility breeds fear. On paper, Brexit should not materially impact the global economy. What I’ve learned over the past 23 years of working in the financial industry is that things rarely work out as they should on paper. My greatest piece of advice is to not let fear get the best of you. Keep your long-term goals and objectives in mind when reacting to the market’s volatility. Most investors base their decisions based upon their emotions, namely fear and greed. This leads to buying when you feel comfortable (at highs) and selling when you don’t feel comfortable (at lows). Our investment team is diligently watching investments and assessing the risk in the markets. And if history is any indication of what to expect, soon the markets will shake off this news and return to normal.
For more information on wealth management strategies, contact Polaris Greystone today.
Doeren Mayhew and Polaris Greystone are separate and unaffiliated and are therefore independently owned and operated. Doeren Mayhew, through its affiliate DM Source Financial, refers clients who wish to engage the services of an independently-registered investment advisory firm to Polaris Greystone Financial Group. A copy of Polaris Greystone’s Form ADV Part 2A (“Brochure”) is available here. The brochure contains important information regarding the services offered by Polaris Greystone and the fees it charges for such services.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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