June 24, 2016
To Our Clients:
So the unexpected happened, again. In an unprecedented move, the UK voted to leave the European Union. What does this mean to you? We have little to no direct exposure to the UK. We have a small allocation to Europe, which we are considering dumping it now. The increased volatility and uncertainty does not help our markets here in the short-term, but as long-term investors this also creates buying opportunities. We shifted our portfolios to be more conservative at the beginning of the year in anticipation of increased volatility already. We raised more cash and our increased bond positions should do well during this uncertain period and provide a nice buffer against short-term market declines.
The next step for the UK and the EU is to negotiate and put in place a plan of action to leave the EU. This process can take up to two years to unfold. We see a weaker euro over time and pressure on various European markets. We expect limited pressure on government bonds, however, as high-quality government bonds are in demand in a low interest rate global environment.
In summary, this is exactly why you chose to work with an investment professional, so you don’t have to worry too much about things like this. It is our job and responsibility to monitor the situation and manage your accounts to meet its investment objective within your tolerance for risk. Please let us know you have any questions or concerns. This is what we are here for. Reach out to your advisor directly, or give us a call anytime at (310) 441-9393.
Vice President, COO