The global markets were caught somewhat off guard to the June 23 vote in the U.K. to leave the European Union. In the days that followed, stock markets around the globe first retreated strongly only to rebound, nearly erasing the “Brexit” losses. While most long-term investors consider short-term volatility due to headline risk as mere noise, an eventual U.K. exit from the EU could have a profound impact on the British economy and the whole of Europe.
With Brexit on our mind, last week’s AAII Member Question asked whether or not investors thought the United Kingdom will follow through on the Brexit referensum vote and leave the European Union:
Of the 2,407 people that voted through Monday, July 4, 69.7% believe that the UK will abide by the referendum’s mandate and exit the EU. The remainder of the voters were somewhat evenly split between believing that the UK will remain in the EU (17.4%) and not sure of what the UK will ultimately do (12.9%).
Weekly Special Question
With the overwhelming majority of respondents believing that the UK will eventually exit the EU, our weekly special question asked how Brexit would impact their investment strategy or plan.
Also by a wide margin, of the 575 people who answered, 68.2% stated that Brexit would have no or little impact on their investment strategy or plan.
Among the 37.2% that said that Brexit would impact their investment strategy, 21,3% said they would reduce their exposure to British and/or European equities. Another 16.3% of those altering their investment plan in the face of Brexit said the recent market decline and increased volatility presented a buying opportunity in British and European equities. Lastly, only 7.1% said they did not know how Brexit would impact their investment plan.
Here is a sampling of the responses:
- “I don’t think it will have much impact. I am pretty well diversified. I am more worried about Hillary or Trump being our next president.”
- “It shouldn’t affect my investment strategy. Buying good companies at value prices, that are “momentarily” depressed will yield future earnings.”
- “It will not impact my investment strategy at all. I will continue to invest a reasonable percentage in overseas countries and third world countries. And I still think Great Britain is a good investment. I am not a big fan of the European Union. It stifles capitalism.”
- “It won’t. The UK was a successful nation before the EU. The elite from Brussels believes the world rotates around them & that we are merely pawns to follow what they say.”
- “No impact on my long term plan. I am following closely for impacts on the credit and financial companies that indicate a more serious regional/global impact. In the short term, I am looking for buying opportunities on high-quality that get oversold by the market.”
- “Already purchased more U.K. companies at depressed prices and will buy more, especially those that have much business outside the E.U., since I think it will stagnate.”
- “Brexit will contribute to weaker corporate earnings in Europe and among multinational companies in general, including those based in the US. A stronger dollar will contribute to weaker US corporate earnings by dampening US exports. A stronger dollar will have a depressing effect on oil prices and also make the payment of loans priced in dollars to emerging market countries more expensive, thereby hurting emerging market company profits. Brexit weakens an already weak international economy. I will continue to invest cautiously, holding a substantial amount of cash or cash equivalents.”
- “The threat of further erosion of the EU will negatively impact our investments for several years at least. The markets don’t like uncertainty and that will be the case for some time. Britain will pay for this bad decision for decades.”
And the response that made us smile:
- “I’ll never eat haggis again.”
Want to weigh in? Participate in our weekly member poll, updated every Tuesday, and see the results online at http://www.aaii.com/memberquestion.
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