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What impact will Brexit and Trump have on my investments? - news article image

What impact will Brexit and Trump have on my investments?

11 Apr 2017

2 minute read

Q: With the UK leaving the EU and Donald Trump becoming President of the USA, what will this means for my investments and what should I do?

A: The problem with investment decisions is that they are essentially ‘best guesses’ and actually, the less common the event, the less likely you are to get them right.

So under normal circumstances, attempting to second guess what any particular market will do next in the short term is extremely difficult. Attempting to second guess what might happen in the medium to long term, however, is probably easier. For example, Gilts are still overvalued, despite recovering from the lows of last August. Inflation seems to be creeping up again and at some point interest rates will rise and that overvalue will come out - but nobody knows when that will happen.

When something unusual or unexpected happens, it not only becomes more difficult to guess what might happen tomorrow but also what might happen in the longer term, since there is nothing to look back to and compare with. Following the Brexit vote it appeared that most “experts” expected the worst. In reality, a combination of changes in exchange rates and positive responses to Trump’s statements on infrastructure spending has meant that markets have been very positive. What we seem to have at the moment is ‘stable uncertainty’ – we know things are going to change, but we have no idea how they are going to change, and consequently, can’t tell what impact these changes will have.

So the best thing to do is to revisit what you want out of your investments and when changes to your life are likely to require changes to your investments. For example, if a change is imminent, such as purchasing an annuity when you retire in 12 months’ time, if you have enough in your pension for your needs then one option would be to move to cash to secure what you have and accept that you will get no more growth. If your objectives are unchanged and your timescale is still longer term, then any major change you make now has to be one that you are confident you will not regret if it turns out to be wrong.

It can be difficult to do nothing when all around the world seems to be changing significantly, but so often that is simply the best thing to do.

What impact will Brexit and Trump have on my investments? - news article image


Ed Gibson

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