Brexit

60 seconds with Marcus Brookes on opportunities after Brexit sell-off

The referendum result was a surprise to financial markets, but amid the sell-off some investment opportunities are starting to emerge.

24 June 2016

Marcus Brookes

Marcus Brookes

Head of Multi-Manager

The UK has voted to leave the EU today, which was a bit of a shock to financial markets. We had just spent the last week or so seeing a very nice rally in risk assets - particularly in Europe and the UK, and in financials - as the markets became quite convinced that it was going to be a vote to remain. So today’s result is a shock.

Foreign markets likely to be less impacted by Brexit

Now the classic sell-off has been observed - basically all the stuff that had just gone up is now going down quite hard. But we have also seen this contagion affect foreign markets, which on the face of it don’t really look like they should be impacted by Brexit.

I am thinking particularly about Japan. Japan overnight was down around 7.5% and it is not obvious to me why Japan would be affected by Brexit, so we are looking to add to that sort of area.

Another area we like would be emerging market equities, something we have spoken about in the past. These are quite cheap, but there is a little bit of weakness in those markets and, again, I don’t think that is something which should be impacted by Brexit. So, emerging market equities look quite interesting.

Bonds look expensive, gold may be an opportunity

The area that everyone seems to have flown to has been high quality bonds, which to our minds were already pretty expensive, so we are staying away from there. But gold could be quite interesting, up 5% as sterling has fallen, and I can see us adding to some holdings in those areas.

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