And what of the recovery? Well, the jury/prophets are still out on determining what will be the next cog to fall off the UK wheel of fortune. Will it be Scotland diving into the coffers of the ECB vaults to fill its sporran with €€€€€€? Or will it be our “special friend”, the USA, stripping our 51st state status, knocking at number 10 to get to the end of the queue so that USA and EU get on with signing a Free Trade Agreement? Will England finally be the little island sailing on Britannia waves with its head kicked off to wonder off into oblivion with it’s much cherished devalued £££?
Assimilating such a scenario gave rise to an acute headache and whilst the above doomsday scenario is most unlikely to happen, not all the pundits have shown their hand. The mere thought sent a cold shiver down my spine because the FTSE100 is far more than an index. The FTSE100 Company represents circa 81% of the entire market capitalisation of the London Stock Exchange (market cap over 2 trillion) and is by far the most widely used stock market indicator. More pertinently the FTSE100 is unequivocally the barometer of the overall UK economy. Therefore, an out scenario would send shock waves far beyond the shores of our little island and would not resonate too favourably with our trading partners.
Tumultuous debacle
Many decades ago a detachment from mainland Europe would cause an upheaval but wouldn’t be unsurmountable. The ties with our cousins across the ocean and the Commonwealth were at their pinnacle. The USA alone, many years ago, was home to 60% of our exports. Some of our industrial conglomerates, such as The Hanson Trust, forged great alliances with the USA. Today the scenario has changed, with mainland Europe now accounting for 60% of our exports. With little over two months until the Brexit vote, what should we do with our investments? This is the question I get asked most these days. My answer is similar to the old estate agent answer to everything “location, location, location”, and mine is “diversify, diversify, diversify”.
The business world is indeed intertwined but the financial world has a peculiar difference, its speed of change is like no other industry, its works at ‘keyboard speed”. If the outcome on the 23rd of June is to leave Europe, on the 24th traders will hit the “sell key” and in seconds vast fortunes of people’s hard earned money will be wiped of the face of the map, or not!
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
In our “Around the Branches” segment we take a look at some of the concerns affecting our clients and our business in individual locations. This time we are in Malta where the regulatory landscape could be changing for financial services firms operating on the island nation.
The later part of the 20th century saw its fair share of financial bubbles. There was the property bubble, stock market bubbles, and then the dot com bubble of 2000, just to name a few. In each instance, people paid exorbitant amounts for things that shouldn’t have been worth anything like the going price. But this is nothing new – look back at the Dutch in the 17th century when already pricey tulip bulbs experienced a twentyfold price explosion in just a single month.