Brexit: Remain Certain in a time of Uncertainty

Brexit: Remain Certain in a time of Uncertainty

If you follow any type of financial news you’ve most likely heard the term Brexit for the past couple of months. If you’re the average American, the term Brexit was just introduced to you Friday morning, 23 June. So what is Brexit? In simple terms it is a British exit, or Brexit, meaning that Britain is no longer apart of the European Union.

To make a long story short, a handful of Brits became increasingly sceptical about the benefits of remaining in the EU since the economic meltdown of 2008. Brits voting to leave the EU believe that jobs and trade will thrive after Brexit. They believe that the present regulations are doing damage to the economy and costing small businesses and families a fortune. Being a member of the EU means that the UK cannot make their own trade deals. Immigration problems, border control, money, and a variety of other issues lead a vote to take place whether or not to remain a member of the EU.

The Brexit vote came in favorable and shocked the markets as we witnessed Friday. Global markets have not been this volatile in years with the VIX index (volatility in S&P 500) up nearly 30% in the past couple of days.

The pound hit its lowest level in 30 years, and global markets are bleeding. So what does Brexit mean to the average investor, and what opportunities are left for investors amid indiscriminate selling of global risk assets? Many wonder if now is an ideal time to buy, or if the market is going to crash.

I can see why these are both reasonable questions with the S&P 500 tanking over 3.5% on Friday, however this is not necessarily the case. It will take years for the full effects of Brexit to unfold, and yes, the stock market has taken a bit of a dive, but no one really knows what the ultimate impact will be.

These upcoming weeks and possible months will be tough especially if the Fed decides to raise rates, and we could see a correction from the previous highs in April. There are still plenty of opportunities present to the average investor.

I believe it a good idea to buy into market weakness, that being said you need to be cautious of buying assets that have a fair amount of exposure in Europe. People are worried that this might trigger a domino effect and other countries will leave the EU as well. Who knows, Brexit might be followed by Grexit, Departugal, Italeave, Czechout, Finish, Slovakout, Latervia, Byegium, and only Remania will stay.

Brexit isn’t all that bad of a thing, infact it does present some opportunities for investors such as stocks with relatively attractive valuations and positive fundamentals, such as quality dividend growth stocks and international grade bonds that have all been brought down by the fear of this whole Brexit thing.

Whether or not Brexit might trigger a small crash in the market is tough to determine. Market crashes are nearly impossible to predict, but the best thing to do is not to panic. Refrain from making radical changes to your portfolio based on emotions caused by uncertainty. Any changes you are considering making to your portfolio should be based on thoughtful reflection rather than emotional reaction. As the great Warren Buffett put it, “Be fearful when others are greedy, and greedy when others are fearful.”