When building your wealth, investment advisors will tell you that in order to be successful, you need to keep your eye on the long view. The problem is, in the post-Brexit dust-up, our vision is still hindered by swirling debris.
England voted in favour of leaving the European Union on June 24, a decision that prompted profound political upheaval resulting in an economic decline in the world markets to the tune of approximately $3 trillion.
How, why and when England will exit the EU is still unclear and pundits say it could take more than two years before the country divorces its 27 Euro cousins. Many investors are feeling the jitters as markets respond to political uncertainty.
But for the savvy investor, the worldwide financial shakeup could actually be a good opportunity to buy when stocks are low.
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“The two worst hurt areas were the financial and technology markets so maybe people should look at those two areas,” says Michael Skretteberg, an investment rep with FundEX Investments. “Possibly they might bounce back the best.”
Expect to see pressure on the European banking system as England shuts down its monetary contribution and expectations build among Europe’s ‘have’ countries such as Germany, France and Denmark, which will have to contribute more to offset the loss of UK capital into financing the bureaucratic wheels of the EU.
Since Europe and the UK will be rife with buyouts and takeovers in the months leading up to separation, investors can stand to earn nice premiums as companies look to buy out their competitors, says Skretteberg.
Manufacturing should do very well thanks to a low British pound, while gold and other precious metals are all expected to do respectively well as uncertainty remains as governments and corporations adjust to the new landscape.
“Gold is a good investment whenever you have two things happening – one is political turmoil and the other currency problems, both of which are present due to UK/EU separation,” Skretteberg said. “Gold will probably do okay.”
He also recommends mutual funds that invest in Europe because opportunities will be there to make money. Make sure the fund is diversified across different nations and types of companies. Do your homework and look for good money managers who have a proven track record in both good and bad market environments because we’ll be experiencing the volatility that comes from both kinds of market conditions during the negotiating and Article 50 implementation.
Property shares in European airlines might be worth considering, says Stephen Frederick, associate portfolio manager and director of wealth management division of Scotia Wealth.
“Because London is such a hub if you start erecting immigration issues that will stem the free flow of immigrants,” Frederick says. “A part of Brexit was this backlash on immigration so what you could see are airlines landing their passengers in Paris, for instance, without having to go through customs because the EU is borderless and that’s something that could evolve over time.”
When investing your money look for companies that pay dividends, but aren’t necessarily the highest yielders and still have opportunity for dividend growth, Kate Warne of Edward Jones told CNBC.
“We like companies with international exposure,” she says, “but what we’re really looking for is companies with a history of being able to make their own luck even in challenging environments, ones that have a stable track record and in this environment are likely to continue to power through though they may face some challenges from Brexit.”
Bill Stone of PNC Asset Management recommends utilities and consumer discretionary stocks such as Nike and Home Depot thanks mainly to their strong dividend growth and balance sheets.
“Even if things go worse than we expect, they will survive,” he told CNBC. “Home Depot is a great one to focus on because it’s really exposed to the U.S. housing market, and not Britain, which is a pocket of relative strength here.”
As for investments you should avoid, Skretteberg thinks southern Europe will be “a touchy place because they rely on incoming capital” from the UK.
Regardless of your investment strategy, when investing he advises that you keep calm, stay the course and ignore much of the media hoopla.
“You have to believe in what you’re investing in,” he says. “Don’t just go in to make a fast buck because there’s a 50-50 chance you’ll get burned.”
