Being a good financial planner means being prepared for the future. With the EU referendum looming over the UK, our financial planners have been examining just how the EU referendum might affect gpfm’s wealth management clients.
For those with stock market investments, it is worth remembering that the markets know that looming political decisions always knock confidence. For recent examples look at the dips in value before the uncertain 2015 General Election or the close-fought Scottish Independence Referendum. This is one reason why investment returns over the past 12 months have been lower than previous recent years.
The markets are currently betting on Remain. This means that most investors and economists are predicting a sharp shock to market value should Leave be victorious. Tatton Investment Management’s Lothar Mentel says Brexit “would be a negative surprise shock for capital markets in the UK and would most likely cause a sharp fall in values in the immediate aftermath.”
So would those investing in other markets abroad be safe? Not so, says Mentel in a letter to investors. “Given today’s interconnectedness of capital markets, we would expect stock markets in other regions to suffer to a similar degree.”
Another widely predicted effect of Brexit would be a weaker pound. This could have a serious effect on those planning to retire abroad in the near future, since a weaker pound would make retiring abroad more expensive for those in the UK.
“All the evidence points to the value of the pound falling after a vote to leave the EU,” Prime Minister David Cameron has warned. Neville Hill of Credit Suisse has also predicted a “sharp fall in sterling” should the UK leave the EU.
The Chancellor, George Osbourne, recently made the strong claim that UK house prices would be hit up to 18% in the case of Brexit. This has been heavily disputed however, with publications like the Spectator arguing that the disruption to property investment that Brexit would cause would reduce future supply, pushing prices up.
Much of the debate has focused around investment in London property. It is thought that Brexit would result in less London property investment, which may cause London’s astronomical house prices to drop as they become less coveted by mega-rich international investors.
For aspirational Brits, however, this may prove no bad thing. A fall in London house prices may open up the opportunity to add a property in the capital to your portfolio after years of being priced out, and then wait for prices to rise again.
For an in-depth, personal look at how the EU referendum can affect your personal finance, speak to gpfm’s chartered financial planners today. Call 01992 500 261 or email firstname.lastname@example.org.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.