Market comment - Referendum and the consequencies

Date Published 28 June 2016

Regular readers of my market comment articles may recall what I said on 1st June, only 4 weeks ago when I wrote about the referendum and opinions within the housing market depending on the outcome. I concluded that whatever the result, the country would still be heading for turbulent times. When David Cameron announced his promise of a referendum for the British people to decide our destiny, I am sure that he had not envisaged the sheer mess that appears to have been the result as some cherish the ‘Brexit` decision while others worry for our future.

It is interesting to see that within Stroud 55% voted to remain with 45% voting to leave, with some analysts polls depicting the younger generations seeking to remain and the more mature seeking an exit, with academia also playing a part in people decision making process. Though, how does this all affect us and the people of Shroud you may ask and more importantly does this effect my decision process as to whether I buy / sell / rent or invest?

We are currently in a level of uncertainty following the people`s decision to exit, albeit with a small majority. Uncertainty within the markets have already seen the dollar fall to a 30 year all time low – good for exports, though overall seen as bad for the economy as imports become more expensive and higher priced good leads to inflation, a key target indicator that the current Government have wanted to keep under control. Though, the melt down in the markets experienced in 2008 and 1992, is better protected today as a result of hearse Bank of England intervention to put measure in place making the liquidity of banks more secure and providing access to treasury funding that previously had not been available. So the argument that austerity measures are not required nor an emergency budget. Yet was this not what the chancellor was stating would happen should we vote to leave? Contradictions maybe or just good strategic policies to calm the markets?

My prediction of ‘turbulent` times now sees a Conservator government in a leadership battle, to which Labour have also jumped on the band wagon. All this adds to our levels of uncertainty, the very things that markets do not wish to see. This instability has already led to the down grading of our triple A credit rating and holistically putting this all within our Pandora box it does not look good.

However, to conclude, I feel that we need to go with our own gut feeling and not necessarily be over concerned with worrying about the consequences. After all everybody`s gain is somebody else`s loss. As the Government declared in 1939 with their motivational poster ‘Keep Calm and Carry on` in preparation for war. Whilst, not so dramatic in reasoning, the message perhaps applies again today…..