As you are probably aware of by now, the U.K. voted on Thursday, June 23 to leave the European Union (EU), which also resulted in the resignation of Prime Minister, David Cameron. This morning every global risk asset across the board is trading off from the obvious (European equities & European currencies) to the less obvious (Asian markets, oil markets and U.S. futures).
This morning (June 24), and throughout the day, Research will be contacting relevant managers for market and portfolio updates. We have asked each sector team to share implications for their respective asset classes during the Monday, June 27 research meeting. We mentioned on Wednesday, June 22 in a memo prior to the vote suggesting that a “leave” vote would lead to some short-term market volatility. Since the June 24th U.S. markets opening – volatility is ever present. Most of this is short-term panic selling and just de-risking, and some of this is due to hedging operations. U.S. markets may calm down after the European close. Also, it is highly likely that various global central bank leaders may issue statements outlining the readiness to act if needed. That could also calm markets.
As this progresses throughout the day, and we get more information from the managers and on the overall market impacts, we will respond accordingly. We will begin working on another communication whose goal is to summarize the situation as it impacts investing in general and SCF’s portfolio in particular. Realistically, nobody knows the true implications, (both short-term and long-term), as this has never happened before. The bear case is that this furthers stirs-up more anti-EU sentiment among right-wing politicians across the continent and leads to the complete unwind of the European Union. The bull case is that the EU seizes this opportunity to make real reform and improves the overall strength of the Union. Time will tell and we will report back as we know more.
Transparent Reporting
As part of our mission Saginaw Community Foundation takes our role as financial stewards of the funds entrusted to us very seriously. This report will be part of an effort to transparently report to our donors and the community financial information on a frequent and recurring basis. Continue to follow us via social media for future updates.
Dave Wetzel, Senior Vice President, Fund Evaluation Group, offers insight into the financial situation in the United Kingdom as a result of the Brexit vote. Fund Evaluation Group serves as Saginaw Community Foundation’s Investment Performance Manager.