Vanguard leader comments on the implications of the upcoming Brexit vote
TRANSCRIPTCommentary by Dr. Peter Westaway, chief economist and head of investment strategy for Vanguard in Europe.
Peter Westway: On June 23, the people of the United Kingdom vote on whether or not the UK should remain a member of the European Union. This is a really important decision with far-reaching consequences for the future of the UK economy. Understandably, investors are nervous about what this might bring. Already we’ve seen some weakness in sterling-related assets, and more generally there’s been global financial market volatility. Why should markets respond in this way? Well, most simply, there’s a lot of uncertainty about how the UK’s relationship with the EU will play out after this vote is taken. And indeed in the real economy itself, we’ve seen firms and households holding back on some of their larger decisions around purchases until this uncertainty is dispelled. So what might the world look like on June 24, after this decision is taken? Well, I think if there’s a vote to remain, it’s quite likely that we’ll see a rally in financial market prices as the uncertainty is removed and things get back to some sort of normal that we had before all this uncertainty around the referendum result. On the other hand, if we see a vote for the UK to leave the EU, then I think we’re likely to see an extension of this period of uncertainty, not least because we’re going to have to go through a long period of negotiation, potentially two years’ worth, while the UK thrashes out its relationship with its EU partners. So what does all this mean for investors? Well, I think the most important thing is that investors shouldn’t do anything too rash with their portfolio. They should remember the long-term goals that they’re setting for themselves, what the asset allocation is that they’ve chosen to achieve those goals, and focus on low-cost investments as usual, and then stick with that plan, trying to tune out the noise that’s inevitably going to occur around this referendum.
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