July 2016 Advisory Commentary

Well, if “Brexit” wasn’t a part of your investing vocabulary before, it certainly was by the time the month of June was over. On June 23rd, the citizens of the United Kingdom voted to leave the European Union in a referendum that sent an electric shock through the world’s markets. While the U.K.’s actual leaving of the E.U. won’t likely happen for two years, the prospect of this eventuality put a solid dose of “risk-off” into investors’ psyche.

The British pound saw a jaw-dropping fall of 10.8% in the days following the referendum. This type of currency movement will continue to inject uncertainty into the investment landscape as we move forward.

While the short-term volatility & negativity caused by this event is obviously a large concern, it is important to always look at the other side of the coin when these types of events occur. The European Union has been in a serious economic malaise since the financial crisis of 2008-09 and has done little to reform its political and economic system of regulation since then. This lack of reform, and a sense of a lack of input or control, was a large part of the British people’s rationale behind their desire to leave the E.U.

The net result of this referendum could likely be a more competitive economy in the United Kingdom that may therefore push the European Union to adopt a more market-oriented economic framework to compete with their offshore neighbors. Only time will tell, but up until now, the E.U.’s leaders have not been seen as wanting to push their economies towards any substantial market-based reforms. This type of policy-making has seen them bounce from crisis to crisis (Greece, Russia, Syria) with few positive outcomes.

Given the likely continuation of this volatility, we will remain moderately allocated to the markets with substantial positions in non-equity holdings, until we see more prudent growth opportunities present themselves.

Brian Weckman, RFC
Chief Investment Officer
Actis Wealth Management L.C.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts may not develop as predicted and there can be no guarantee that strategies promoted will be successful.