No knee-jerk reactions
Piers Hillier, CIO at Royal London Asset Management:
“On the back of this morning’s result we expect the UK will fall into a recession. Unfortunately I see unstable market conditions lasting for between three and five years whilst new trade agreements are drawn up.
“It is our view that the UK Government will be left with no choice but to stimulate the economy through fiscal and monetary means, flooding the system with liquidity if necessary.’
“As an investment house, our portfolios are constructed in such a way that they provide resilience across a whole range of possible economic outcomes. We will not be making any knee jerk changes to our portfolios until the direction of travel becomes much clearer.”
Low but positive growth prospects still in place
Tom Becket, CIO, Psigma Investment Management
“We favour a global focus at Psigma and own a range of assets in international markets. After the significant falls in sterling today, we would expect those investments to help protect portfolios. In addition, we have added specific investments through the year so far to provide further protection in the case of a ‘Brexit’; we expect those investments to make positive returns today and also through a period of market uncertainty.
“We have also reduced risk progressively through 2016. Particular noteworthy features are a move to being underweight in UK equities, in part because of the concern over ‘Brexit’, but also because we felt that they had become unattractive. We also reduced our exposure to European equities and European financial institutions, as we could not be sure about the ongoing future of Europe’s political system and the ability of regional companies to make profits. Finally, we have also recently lowered risk through reductions of higher risk corporate bonds, property shares, resources stocks and emerging market equities.
“While in the short term it is almost impossible to predict how badly markets will take this news, although based upon heavy falls in Asia this morning, it is likely to be a poor day in Europe, it is important that we immediately think about the medium term future for markets and the global economy. Aside from the direct negative impact upon Europe and the UK, we feel that in time the UK’s departure from the EU will not be a game-changer for the global economy. Our expectation for low, but positive, growth remains in place, so we will manage our asset allocations around that central view.
The real issue is what it means for Europe
Mark Burgess, CIO EMEA and global head of equities, Columbia Threadneedle
The thing that markets hate most is uncertainty and with the prime minister resigning we’ve got political uncertainty thrown in on top of economic uncertainty and we don’t know what shape the UK economic arrangement with Europe is going to take. That is going to take quite some time to negotiate and we are going to have to negotiate any bilateral trade agreements with the rest of the world as well.
The real issue is about what it means for Europe. We’re likely to see calls for referendums in some of the other European countries and members of the Eurozone and the single currency, and I think the market is going to worry about the implications of that. We’re a single trading nation and clearly what the nature of our trading arrangements with rest of the world looks like is going to be uncertain and I think that will naturally slow activity. The uncertainty as well as what this means for Europe will also slow European equities unequivocally so this is a negative event for global GDP.
