So I thought I should look back to 1975, the last time we held a referendum on the future of the UK in Europe to see what happened to investment markets then. Immediately, of course, I need to note that the world is a very different place now – back then it was the European Economic Community consisting of just nine member states and, not to put too fine a point on it, many of today’s decision-makers are too young to have any meaningful recollection of the events of 1975. (For me, the greatest trauma of 1975 was crashing my bike into the back of grumpy-old-man-from-number-74’s car, but that’s another story.)
So as I say, I had a look at what happened in 1975. Here is a well-used chart that plots the history of the main UK asset classes since 1950. Dotted throughout are world events that one might have thought would have had a big impact. There is the Suez Crisis, the Winter of Discontent, various wars, several ‘Black’ days and the Credit Crunch but, interestingly, not the 1975 referendum. Yet along that timeline of 65 years the long-term outcome is the same; equities have out-performed all other asset classes, and the ‘blips’ caused by these events (if they were indeed a consequence and not a coincidence) look just like that, little blips along a path.
I am not trying to say there is nothing to worry about, inevitably this referendum will be one of those big world events whichever way it falls, but I do want to reiterate the same story we always put to our clients. Our financial planning focus is viewed over extended periods, in many cases not just the lifetime of the individual but beyond into the lifetimes of successor generations. So our view remains the same, that unless there are short-term needs that have to be funded, we take a long-term – more than a lifetime – view and we do not advocate trying to second-guess the market for short-term considerations.
Having said that, we have been talking with, and listening to, the portfolio managers who run our clients’ money. The consistent view is one of currency risk (and currency hedging strategies are already being built into portfolios by them). In fact we have seen some evidence of this – recently the polls have shown an uptick on the Remain side and at the same time the Pound has rallied somewhat against the Dollar and the Euro. I say ‘at the same time’ because there is no way I can say if this is consequence or coincidence. Who knows if the Pound recovered because of the polls or because of normal everyday trading conditions? But it is certainly consistent with the stance the portfolio managers are taking.
So, our view Remains that you should Leave your portfolio as it is, allow the appointed managers to make prudent adjustments as they see fit and accept that there will inevitably be some short-term volatility. Over the long-term the strategy already in place is likely to be the best one for you.
Philip Chandler APFS, CFPTM, Chartered MCSI
Chair of Aspinalls Technical and Investment Committee
*I would love to be able to claim credit for the title of this piece, but I can’t – it came from a recent seminar I attended, given by the Chartered Institute for Securities & Investment.