- June proved to be a good month for our portfolios. They grew by between 1.46% and 2.10% (see below).
- The positioning of the portfolios before the referendum vote included being overweight overseas equities which ultimately proved to be a good decision as sterling slumped. This ensured the value of our overseas investments rose.
- Gold increased significantly due to the fear surrounding the implication of Brexit. Portfolios I to IV all include an element of gold.
- UK commercial property and smaller companies fell over the month and this provided a headwind to the portfolios.
- The portfolios remain diversified and have outperformed significantly since launch.
We have just experienced one of the most volatile and yet interesting times for investors. Looking at the overall market moves in the last month hides some wild rides for individual shares and sectors of the market. In a major surprise to the investment markets and community, a narrow success for the ‘Leave’ camp resulted in the UK electing to leave the EU. Initial equity market reaction was swift and decisive – at the open on Friday the 24th the FTSE 100 plummeted some 8% before a day long rally saw the market close down some 3%. Since then, we have seen the political fallout, with Cameron resigning and Michael Gove effectively forcing Boris Johnson out of the running to be the next PM. On top of this, we have an opposition in tatters.
In terms of the FTSE 100, the market has taken it all in its stride, rallied and reached a new high for 2016. Popular media commentary is reaching the conclusion that Brexit is fine; we have voted for the uncertainty that leaving holds and the market hasn’t collapsed, therefore Brexit is good for the UK. It is clearly too early to know what the longer-term impacts of this decision will mean, not only for the UK but the Eurozone as a whole – not to mention the global landscape.
European equity markets, as well as UK smaller and mid cap stocks, have not performed well; over the last month most are down around 5%. The global nature of the FTSE 100 (and of course the substantial decline in the pound) has enabled the large cap index to outperform.
The biggest loser has been UK commercial property funds. Immediately after the Brexit vote they lowered the value of their funds and have now temporarily suspended dealing due to investors wanting to take their money out. This has made headline news. Due to the fact that it takes time to sell a property in order to pay the proceeds to investors, this is standard practice for property funds and is done in order to protect the remaining investors. We are monitoring the situation carefully as we have property funds in our portfolios and will communicate any actions that we take in due course.
In the aftermath of Brexit, the Bank of England governor Mark Carney has been quick to highlight that the Bank is likely to cut interest rates this summer. This has also enabled the markets to continue to rally. Despite the political uncertainty, markets continue to take their direction from central bank activity. Overseas equity positions have benefited UK investors through the weak pound and our overweight position has helped to protect the portfolios.
Going forward we do not know which asset classes will be the best performing ones and which could suffer from the fallout over Brexit. By analysing trends and performance data we hope that we can invest more of your wealth in those asset classes that are going up and less in those that are falling.
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