If Britain Exits the EU should you Exit International Stocks?

On June 23rd British, Irish and Commonwealth citizens will decide if the UK will remain in the European Union or exit the country bloc. The referendum is being held as Britain has not voted on membership since 1975 and some feel the UK would be better off on its own.

Those for the move believe that being an EU member country is too restrictive with too many rules and membership fees in the billions that provide little in return. They reject the idea of having closer and closer ties with other European countries and want to have better control of their borders.  Those against leaving the union believe that it makes trade with other EU countries easier and it provides a flow of immigrants that fuel economic growth.  They believe that the UK’s world standing would be hurt by leaving and its economy and defenses would be more secure than being on its own.

Currently, polling shows that people are split on the decision so it could certainly go either way.

We believe there will be significant volatility in stock markets around the globe near the vote and particularly in Europe. However, we don’t recommend moving out of international markets and the UK specifically.  Regardless of the outcome investing internationally remains a core part of a well diversified investment portfolio.  While markets could jump or sag on the voting results, the news will be replaced with another significant market moving event somewhere else in the world in short order.  The best way to minimize any impact is to diversify broadly amongst equities and hold high quality fixed income that will act as a counter balance to the equity allocation.  The move could also potentially provide an opportunity to rebalance the portfolio – selling out of positions that are up and buying what is down.

We will keep a close eye on the situation and look to capitalize on any volatility. By remaining disciplined to your strategy in the face of significant market moves you best position yourself for long term success.

 

 

Index Performance                                    May     YTD    Trl 1 Yr       

US Stock (Russell 3000)                                  1.79%    3.41%     0.22%
Foreign Stock (FTSE AW ex US)                   -1.51%   0.78%  -10.60%
Total US Bond Mkt. (BarCap Aggregate)     0.03%   3.45%     2.99%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) -0.15%    1.39%      1.33%
Municipal Bonds (BarCap 1-10yr Muni)     -0.06%   1.69%     3.89%
Cash (ML 3Month T-Bill)                                 0.01%   0.11%      0.15%

 

About

Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services.  We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets.   Visit us at www.raffawealth.com

 

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