From China to Chile, Australia to India and especially in the United States the currency, bond, commodity and equity markets have their eyes focussed on the UK. In Japan, the Bank of Japan decided to leave any policy decisions until next month and the Chair of the US Federal Reserve, Janet Yellen, said that a vote on June 23 by Britons to leave the EU “could have consequences in turn for the US economic outlook”.
Politicians, central bankers, economists as well as those directly involved in investment markets are weighing up the effect of a Brexit. The UK is the 5th largest economy in the world so the impact for trade, finance and business is significant. Already we have seen the pound fall by around 10% as uncertainty increases and the FTSE 100 has fallen to around the 5950 mark at the 16th June.
Over the past 6 months there have been many events which have caused markets to be more volatile than normal. Whilst the FTSE 100 is but one gauge of market conditions as we know it’s the one which is most frequently quoted on the news. A week before the Referendum the FTSE is 2% lower than it was six months ago; 6061 on 16 December 2015. During the intervening 6 months it had been as low as 5537 and as high as 6410.
In the same 6 month period many of the more diversified funds we use, and categorised by us as being of low to moderate volatility, have increased in value by over 2%, indeed many by over 3%. Markets are very difficult to predict in the short term and this week even more so, but the Save & Invest approach of a diversified portfolio and a strategy in place to cope with volatility we believe remains the best strategy.