The British Are Leaving! The British Are Leaving!

In a shocking vote early this morning, the British people have voted for their economic sovereignty. As a result, Britain will begin its exit from the European Union, a bloc of 28 countries first formed after World War II. This ‘Brexit’ has caused stock futures to decline steeply, ushering in a wild day on Wall Street today, and what’s likely to be a lengthy period of economic uncertainty. Future history books now have a new chapter.

So what is the European Union and what does this mean to us and the world? In short, the 28 countries within the EU are independent from one another but they agree to trade under the agreements made between the nations. The European Union operates a single market which allows free movement of goods, services, and people among member states. This union makes it likely the largest market in the world, if treated as a single country. 

Britain’s exit from the EU would mean that its trade agreements will have to be redrawn, its borders protected, and new leadership will take the reigns. In fact, Britain Prime Minister, David Cameron, has stated that he will step down in October, since he was opposed to the Brexit and doesn’t feel fit to lead Britain through something he was opposed to.

So what does this mean to you?

Initially, brace for a sharp decline in the stock market. Much of the market’s gain this week was due to the fact that most people believed the Brexit would not pass with a majority vote. As a result, currency values are fluctuating rapidly, including the British Pound, Euro, and the Dollar, which has been strengthened as its relative stability is being sought after. My how quickly things change.

As has been the case before (think China last year), investors are forced to revisit why they’re investing in the first place. If short-term gains are your primary motive for investing, then this market isn’t for you. It’s going to be a bumpy ride for some time. If instead, you’re an investor who believes that investing is a long-term process, where people continue to go to work each day, building, innovating, and serving others, then long-term value will be created in worldwide markets. The market will grow again and profitable companies will pay dividends to stockholders. Thus, this will be a historical, yet manageable blip on your investing radar.

Fortunately, the volatile events of the past year or so have already caused most investors to revisit their planning and tolerance for market risk, and are therefore invested commensurate with their long-term goals. If that doesn’t sound like you, please reach out to me so we can discuss your needs and desires at this juncture.

Like a broken record, I’ll remind you that retirement income should be protected from deep market declines, in many cases guaranteed through the use of guaranteed income solutions. When you do that, these inevitable market fluctuations do not jeopardize your lifestyle as they would if you were at-risk with your income-producing assets.

We’ll all be watching closely to see the effects of this historic moment. I’ll do my best to communicate any pertinent updates. Until then, take it all in, and be a witness to history in the making.

All the best,

Adam Cufr, RICP®