In an unprecedented and historical event, the UK has voted to leave the European Union by a narrow margin (52% VS. 48%). This is a monumental occurrence which will have significant implications (some unintended) for not only the rest of the EU, but also for the rest of the world. Many questions remain unanswered including: who will become the UK's new Prime Minister (with David Cameron's resignation following the vote), will any other countries bring forth referendums to leave the EU, what are the implications on the European banks and debt ratings, how will this impact multinational companies and their trading patterns with Europe, and what if any of this process will change the mindset of US voters as our election looms.
Needless to say, there are more questions than answers today - and that dynamic is likely to remain in the immediate near term. This is truly uncharted territory.
So, what does this mean for your money and what is our strategy in the face of this historic event? To borrow from a famous UK slogan in its subway tunnels, we are "Minding the Gap" We are standing on the platform and are keenly aware of the fast-moving train that is the global markets in the distance. Simply put, we are cautiously navigating the space in between and allowing the train to slow before we take action. For already-invested capital, we are staying the course. With interest rates falling (in a flight-to-safety trade), we continue to believe the risk/reward dynamic within our portfolios (which are well diversified with a strong orientation towards dividend paying equities) is favorable in this environment. However, for cash positions, we feel the pace and direction of this fast-moving train is far too uncertain at the moment, making the risk of deploying capital at this time far greater than the upside.
And perhaps most importantly, as we remain firmly planted on the platform, we will not lose sight of the immense importance of this decision and will work diligently to unwind and fully understand the many interconnected impacts of this vote.
In an unprecedented event, the UK has voted to leave the European Union (52% vs. 48%). This decision has significant implications (some unintended) for not only the rest of the EU but the rest of the world. What are we doing now? To borrow a famous phrase from the UK, we must "Mind the Gap." We must be aware of the space between today