The good, bad & ugly of BREXIT
The big question on everyone’s minds is – “What happens now that we have left the European Union?” After the initial shock of Brexit, it’s anyone’s guess what the long term effects will be. House prices, interest rates, investments, pensions and currency markets coild all be afftcted. Not to mention jobs, the economy and a myriad of other important things. So what are good the bad and the ugly of Brexit from an IFAs perspective?
Investments and pensions: Many analysts predicted an all mighty stock market crash if BREXIT happened. The reality was somewhat different. The market wobbled a bit on day one of the announcement but solidified and strengthened thereafter. Subsequently, it has risen by as much as 10% since 27 June. This is great news for those with stocks and shares ISAs, pensions and equity based investments. The main reason for this was that now that a lot of the uncertainty was over, the markets could now plan ahead.
We certainly face choppy waters ahead as and when the full consequences of our leaving Europe are revealed. Charles Scholefield from the Investment committee at Sterling & Law says, “Those invested in managed funds should see promising returns as fund managers take advantage of price swings and capitalise on value. Those invested in tracker funds which simply follow market indices may face a bumpier ride. For example, commercial property sector has already been hit as fund managers suspend trading on funds to prevent large outflows. Gold on the other hand has soared, as investors look for safe havens. What is clear is that the best fund managers should make money at this time of increased volatility. This can only be good for investors.”
The housing market: “If you think the property market was flat before Brexit, you should see it now!”, says one of my local Estate Agents. “Prior to Brexit, we had the fallout from the Buy to Let tax changes. This dampened the demand for one and two bedroom flats. Now, everyone seems to be sitting on the fence waiting to see what will happen next.” This is of course understandable. Uncertainty frightens people. And when people are frightened, they delay making decisions. So how do we turn this into a positive?
House prices in the UK are a good barometer to how well the economy is doing. If house prices are robust, the general interpretation is that things are pretty good economically. This inspires confidence and therefore, spending, which is good for the economy. The government’s economists therefore have a vested interest in ensuring that house prices stay robust; especially in the long term. In the shorter term however, there are certain to be a few wobbles, which represents a great opportunity for those looking to buy. Furthermore, noises about interest rates going down even further can only be good news for those looking to invest in residential property. Those looking to sell could have a much tougher time.
The pound: Predictably, the pound has taken a pounding post Brexit. Anyone dealing internationally has already been affected. Prices in the US and Europe would appear to have increased dramatically overnight. Holidays prices for example seem to have shot up, however, to steady demand, tour operators are compensating by artificially adjusting prices. Ironically, with the pound losing value, we may see an influx of visitors to the UK. This in itself may not be such a popular phenomenon for those who voted out for anti-immigration reasons! Nonetheless, once things settle down, the pound should regain strength, though perhaps not to pre-brexit highs.
In the words of Paul Getty, “Without the element of uncertainty, the greatest business triumph would be dull, routine and eminently unsatisfying.” Whether or not you subscribe to this is your decision. What is certain is that there has never been a better time to sit down with a financial adviser to plan ahead.