June 2016 – Your Financial Wealth and the EU Referendum

Your Financial Wealth and the EU Referendum We are so lucky to live in the UK because we are privileged in so many ways. One of those privileges which unfortunately too many take for granted (and some abuse) is our right to hold and express our own opinions. I know that many of my clients will have different views to my own on politics and religion though I am sure that they all share high moral values, they want to do the right thing, and they want to make a difference. On Thursday 23rd of June 2016 we all have been asked to vote in an EU referendum and according to most respected authorities there will be considerable financial implications if the UK votes to leave. Taking the FTSE 100 as an indicator it reached a low point this week and the value of the pound has also fallen with the announcements that the Leave campaign are in the lead. Why has the investment market and the value of the pound fallen in value? I believe that is down to one word: ‘Confidence’. There have been lots of facts and figures presented by both sides and whose set of figures you believe is down to whether you are in the Remain or the Leave camp. However I believe that ‘Confidence’ is a more important factor than any set of facts and figures because the international markets operate on confidence. If it is seen that the UK is in a better financial position after June 23rd confidence will rise and the value of your investments and the pound in your pocket will rise again. If the UK enters a period of uncertainty confidence will not return for some time and you can expect your investments to linger or fall, and the value of your pound to fall with the cost of imports rising. Regardless of where you place your vote I passionately believe that we should all exercise our democratic right and turn up to vote. However it is rare that one person’s vote makes a difference to the outcome so all that most of us can do is sit back and wait for the result. Should you make any changes to your investment portfolios? The answer is a very definite ‘No’. My clients with Dimensional Fund Managers held on the Nucleus platform are in highly diverse and low cost portfolios with a significant international element which should help to counteract any fall in the UK market if it happens. I believe that moving out of investment into cash is the wrong thing to do and if you are overweight in cash, then now is probably a good time to invest. I have watched the EU debates and read the literature and I’ve been as confused as most of us by the facts and figures. I have swayed between Leave and Remain and discussions with family and friends have followed extensive and sometimes heated discussions. I have made up my mind by looking at who was supporting each side and who I wanted to identify with. This might help you so my list is below: My apologies for those that I have missed from either camp because space is limited but the list was enough for me. The following are all recommending ‘Remain’: The Governor of the Bank of England; the International Monetary Fund; The Institute of Fiscal Studies; The Confederation of British Industry; President of the United States of America; The leaders and heads of state of every other single member of the EU; Eight former US Treasury Secretaries; President of China; The prime ministers of India, Canada, Australia, Japan, and New Zealand; The chief executives of most of the top 100 companies in the UK including Marks & Spencer, BT, Asda, Vodafone, Virgin, IBM, and BMW; Kofi Annan the former Secretary General of the United Nations; All living former Prime Ministers of the UK (both parties); The Prime Minister of the UK; The leaders of the Labour Party; The Liberal Democrats; The Green Party; The Scottish National Party; Plaid Cymru; Sinn Fein; The current chancellor and his predecessors; Martin Lewis the money saving expert; The Secretary General of the TUC; The National Union of Students; The National Union of Farmers; The Chief Executive of the NHS; Stephen Hawking; Secretary General of NATO; Churches of England, Scotland and Wales; Greenpeace; World Wild Life Fund; The World Bank, The OECD; a huge number of reputable and recognised economists; Justin Urquhart Stewart of Seven Investment Management; Hundreds of leading arts figures including Benedict Cumberbatch, Sir Derek Jacoby, Sir John Hurt; Jeremy Clarkson; about 220 (96%) of Labour MPs; about 170 (60%) of Conservative MPs; I think that’s enough! The following are recommending Leave: Boris Johnson (who many have suggested saw it as his quickest route to number 10); Michael Gove (my apologies for mentioning his name in the presence of my clients from the teaching fraternity); The Leader of UKIP Michael Farage (he seems like a nice man and shares my passion for real ale); The BNP; British First; Donald Trump; Vladimir Putin; Marine le Pen; ISIS; about 10 (4%) of Labour MPs; about 130 (40%) of Conservative MPs. If I’ve got this right it makes the Leave camp seem rather unattractive and quite lonely. I promise that I’ll get back to my usual newsletter next month by then we should know whether Confidence has returned (or not!)