What does Great Britain’s EU exit—or Brexit, as it is commonly known—have to do with you? So far, it has caused a lot of fear in the financial markets. Investors do not like uncertainty, and they often sell stocks in response to something they do not fully understand. In this case, the full impact of Britain leaving the EU will not be clear for some time. Here are a few changes that could happen:
1. New regulations will be put in place. This will have the effect of slowing down Britain’s economy as it renegotiates trade agreements.
2. The British pound has already dropped, making foreign goods more expensive in England. (This could be a major concern for English consumers, as many of their items are imported.)
3. On the other hand, English goods now are cheaper in Europe and the rest of the world.
4. Over the next few months, investment in Britain may dry up, banks may retrench (stop lending), and companies and consumers could cut spending, forcing the government to cut back further.
These are just a few scenarios. The ultimate impact of Brexit will remain unknown for some time. Another scenario could be that the country has a second vote a few months from now and decides to stay in the EU.
In fact, is not clear what stock markets at home or abroad will do. The best plan of action, in my opinion, is to stay the course with a balanced strategy, including stocks, bonds, and cash. Eventually, investors will be rebalancing and moving some of the money from cash and bonds into stocks to try to take advantage of the market’s mood swings. This is not another 2008 scenario, so relax and feel free to call or email with any questions you may have.