Brexit. By now, you have certainly heard this term in the mainstream press. But what does it mean - and how does it impact you and your money? We've got you covered.
What is "Brexit"? - Brexit is short for British Exit, a pending referendum vote in the UK to be held on June 23rd, where the country will decide whether or not to leave the European Union
What brings UK to this crossroads? This has been years in the making, as UK has often been a reluctant European, torn between its desire to be a standalone nation and the safety and security that comes from being a part of something larger. Such struggles for independence are not new as countries grow and expand their cultural and ethnic footprint and have occurred in other nations over time
What could occur? We view this situation as high risk, low (and uncertain) return. As is the case with most emotionally-charged decisions, there are many unintended consequences (both positive and negative)
What are the arguments on each side? The two main issues at play: the economy and immigration. The "remain" vote focuses on the risks of going it along as it relates to jobs and economic growth and income stability. After all, being in the EU brings about a certain amount of stability and certainty. The 'exit" vote focuses on a desire for sovereignty (free the UK of regulations and budget constraints), as well as the immigration debate (give the UK the ability to restrict access as an independent country)
How does the UK fit into the EU and what impact will a departure have? These charts from Blackrock do an excellent job of showing the UK's contribution. If it leaves, there are many implications for the remaining EU, including loss of competitiveness, increased challenges in security/defense, a hit to finances/budget, loss of a key free-market proponent, and likely an increase in short-term EU cohesion (as the UK has been the biggest opponent)
What are our thoughts? At this time, we are in line with the the latest polls, which indicate the UK will remain in the EU. Markets are trading higher this week as well based on this belief
What do I do with my money? There is no need to take any action until after the vote on the 23rd. We are holding slight cash positions in accounts so that we can put it to work in the event of a leave vote (as markets are likely to sell off broadly immediately after). But given our low exposure to European stocks and diversified approach to portfolio construction, we see no other strategies that need to be implemented