On Friday, we all awoke to a new reality: after 25 years, the United Kingdom was leaving the European Union. The impact was immediately felt in our portfolios as the Dow Jones lost 610 points (about 3%)1 while international markets were hit harder (the MSCI ACWI ex USA Index lost just over 6%)2. The reasonable question to ask is: “Given this news, how should I adjust my portfolio?”
While the Brexit changes many things, it doesn’t change how your portfolio is structured given your goals. Your goals and situation determine how to invest, not the latest current events. This is best summarized by one of our core values: “Invest in the market – do not attempt to predict it.” Selling your international holdings until things “calm down” is an example of trying to predict the market (Mike was in a Bloomberg News article commenting on this issue – if you follow our Facebook page you might have seen the link in our post).
To illustrate this point we thought it would be helpful to list the events since 2008/2009 that seemed like events that could have had negative long-term impacts on the stock market, but turned out to be short-lived and quickly forgotten:
- The U.S. government debt crisis
- China’s economy (remember the Dow falling 800 points in late August 2015 and oil dropping 5.5%?)3
- Oil prices crashing (and the terrible start to 2016 that turned positive before the end of Q1)4
- The flash crash and high frequency trading
Each issue dominated the financial news and may have tempted you to exit the market.
It can be difficult to stick to your strategy, but it is often that steadfastness that rewards investors. We value the confidence you place in us as we manage your money in light of your financial plan. Please do not hesitate to call or email with any questions.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
International investing involves risks such as currency fluctuation and political instability and may not be suitable for all investors.
1 S&P Dow Jones Indices
2 MSCI Inc.
3 Wall Street Journal: Dow Plunges 531 Points in Global Selloff
4 Dimensional Fund Advisors: Quarterly Market Review Q1 2016