After several months of speculation on whether or not the United Kingdom will vote to leave the European Union (often referred to as the “Brexit”), the decision has finally been made. On June 23rd, 2016 the voters of the United Kingdom, by a margin of approximately 52% to 48%, voted to leave the EU.1 Following this decision, we have seen global markets fall due to the unexpected outcome of this decision and the uncertainty it creates moving forward.
While global market sell-offs are not a welcome event, we believe that these sell-offs are driven primarily by emotional responses and not on material long-term fundamental changes to the markets experiencing these sell-offs. It will take quite some time for the global political powers to weed through the details and consequences of the Brexit decision, and there will be ample time to debate the ultimate impact this decision will have on the global economy but it is important to keep this in mind – a retirement plan is for long-term investing. Though global macro events such as these tend to distract from that fact, it is important to keep asset allocation and diversification in mind when working towards your retirement goals.
To be clear, we are not downplaying the seriousness of events that occurred, but we believe that at times like these it is best to take a step back and maintain a long-term view – acting prudently, not emotionally.
In order to make more sense of what next steps the UK must make, we have included details about this historic decision, and what this means for the global markets moving forward.
- The decision was made by a 52% to 48% margin with a 72% voter turnout.1
- While England and Wales voted in favor of leaving, Scotland and Northern Ireland voted in favor of remaining.2
- The United Kingdom and the European Union now enter a 2-year negotiating period in which details of the exit process and new political and trade agreements are worked out.2
- That two-year period can be extended to further the negotiating process.2
- The UK will continue to adhere to EU treaties and laws, but will not take part in any EU decision-making.3
- The British central bank, the Bank of England, has pledged GBP250 billion to help support the British economy and pledged to take additional measures if needed.2
- The United Kingdom accounts for only 2% of global GDP.4
Events such as these do provide an opportunity to revisit your current investment allocations in order to determine if they are appropriate for your risk tolerance and time horizon – that is where we come in.