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To Brexit or not to Brexit, that is the question

400 years of Shakespeare and we are still pondering over the question!

I recently returned from London, more specifically the City of London, and was rather surprised to find that the financial ‘experts’ were still in a state of flux, arguing over the theoretical economical fall out on the day after the fast-approaching “In” or “Out” Referendum.

I came to the conclusion, after pouring through reams of editorial columns from would-be financial gurus, that the prognosis relating to the likely impact on the FTSE100 on June 24, the day after, was that the general consensus converged on a simple equation. If the “In” campaign wins the day, there would be an immediate 5% appreciation. Conversely, if the “Out” campaign has it, the FTSE100 would suffer a dramatic 10% loss.

And what of the recovery? Well the jury/prophets are still out on determining what will be the next cog to fall off the UK wheel of fortune. Will it be Scotland diving into the coffers of the ECB vaults to fill its sporran with €€€? Or will it be our “Special Friend”, the USA, stripping our 51st State status, knocking at Number 10 to get to the end of the queue so that USA and EU get on with signing a Free Trade Agreement. Will England finally be the little Island sailing on Britannia waves with its head kicked off to wonder off into oblivion with its much cherished devalued £££?

Assimilating such a scenario gave rise to an acute headache and whilst the above doomsday scenario is most unlikely to happen, not all the pundits have shown their hand. The mere thought sent a cold shiver down my spine because the FTSE100 is far more than an index.

The FTSE100 Company represents circa 81% of the entire market capitalisation of the London Stock Exchange (Market Cap over 2 Trillion) and is by far the most widely used stock market indicator.

More pertinently, the FTSE100 is unequivocally the barometer of the overall UK economy. Therefore, an “Out” scenario would send shockwaves far beyond the shores of our little Island and would not resonate too favourably with our trading partners.

Tumultuous debacle

Many decades ago, a detachment from mainland Europe would cause an upheaval but wouldn’t be unsurmountable. The ties with our cousins across the ocean and the Commonwealth were at their pinnacle point. The USA alone, many years ago, was home to 60% of our exports. Some of our industrial conglomerates, such as The Hanson Trust, forged great alliances with the USA.

Today the scenario has changed, with mainland Europe now accounting for 60% of our exports.

With little over two months to the Brexit vote, what should one do with our investments? This is the question I get asked most these days. My answer is similar to the old estate agent answer to everything – “Location, Location, Location” – and mine is “Diversify, Diversify, Diversify”.

The business world is indeed intertwined but the financial world has a peculiar difference. Its speed of change is like no other industry – it works at “keyboard speed”. If the outcome on June 23 is to leave, then on the 24th traders will hit the “sell key” and, in seconds, vast fortunes of people’s hard-earned money will be wiped of the face of the map, or not!

If you are uncertain of how diversified your portfolio is, contact us for a financial review on 289 355 685 or [email protected]
Edifício Mapro, Estrada Quinta do Lago, 8135-106 Almancil.

By António Rosa

António Rosa is Regional Manager in Lisbon at Blacktower Financial Management (International) Limited
Quinta do Lago: 289 355 685 | Cascais: 214 648 220 | [email protected]
Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission Licence 00805B. Blacktower Financial Management Ltd is authorised and regulated in the UK by the Financial Conduct Authority.