Market volatility is a constant in our modern world. But so-called Black Swan events sometimes take the concept of volatility to the next level. On June 23, voters in the U.K. passed a referendum supporting the idea that Britain should leave the European Union. Known as “Brexit” for short, this surprising political outcome instantly plunged international markets into crisis, and the British pound took a beating.
Prior to the Brexit vote, Wall Street was already somewhat destabilized and reeling due to an abnormal political season in the U.S. and several other factors. And since the vote, the immediate future is looking anything but placid.
So what are the implications for the average U.S. investor? Will Brexit (and all the other turmoil we see in the news, like the horrific attacks in Nice, Istanbul, and elsewhere) somehow impact your estate planning or long-term financial strategy? If so, how should you react, if at all?
When big political events take over the headlines, they tend to give people the jitters regarding their portfolios and legal plans. Brexit is no exception. It didn’t take long for Twitter and Facebook to burn red hot after the vote and lead to speculation about Brexit’s ramifications and “quick fixes” for how to respond to these imagined scenarios. As serious as the situation is, however, you definitely do not want to overreact. Let’s all calm down and take a drink of water.
What Will Brexit Do to the Global Economy?
It’s difficult to say just what Brexit’s long-range effects will be. All we have right now is a vote to leave the European Union. Britain hasn’t started implementing that plan yet. The best we can say at this point is there is a fair level of uncertainty in the markets stemming from this unexpected vote.
Many analysts predict a recession in the UK, should the country actually pull out of the EU. If that happens, it will likely spill over into the rest of Europe, and probably lead to some ripples globally. But that negative forecast would only happen once implementation gets underway—12 – 24 months out. And, just because there’s a recession in Europe doesn’t necessarily mean it’ll travel across the Atlantic to the U.S.
At this point, investment managers are keeping their eyes on the opportunities. A recession doesn’t necessarily spell doom and gloom, and even the prospect of one shouldn’t lead to a radical overhaul (or even small amendments) to your particular investment, legal, and estate plan. Bear in mind the following:
- Overreacting to big picture financial news can be as bad as or worse than doing nothing at all.
- What’s happening in the global marketplace is out of your control; you just need to manage your business, money, and legal affairs.
- By getting clarity about your long-term plan and developing contingencies for different financial events, you can feel more at ease.
- There’s even a chance that the Brexit won’t actually happen, so overreacting might even be wasted effort.
Here’s the bottom line: Keep a cool head. Work with us and the rest of your legal and financial team to adopt a strategy that achieves your goals. We are here to protect your future. Give us a call today at 650-488-1829 to discuss.