Thoughts on Brexit

07/11/2016

Dear Clients and Friends,

There is an interesting phenomenon playing out in the financial press, in the form of a missing word that speaks volumes about human nature. The word is: “referendum.”

There is a plethora of headlines referring to the “post-Brexit” environment. To imply we are in a “post-Brexit” environment is like stating that a newlywed couple is enjoying a “post-marriage” honeymoon. Current headlines really should refer to the “post-Brexit referendum,” because only the referendum is done. A narrow majority of U.K. voters called for a disunion from the EU, when in fact any actual Brexit is likely to be playing out for years to come. Only then will we be truly “post-Brexit.”

There is a practical reason for the lapse. The media must keep its headlines short and snappy, and “referendum” is neither.

We also suspect there are behavioral forces at play. For better or worse, it is easier to wrap our heads around compelling conclusions, since neither we nor the markets know what lies ahead. As we saw illustrated this quarter, the markets react to each new piece of information by leaping upward, dashing downward or staying put.

It stands to reason that investors would rather think about the Brexit as an isolated event that can be made sense of right now. It is much harder – and yet important – to accept the chronic state of uncertainty that is and always will be part of investing. It is worth remembering that capital markets have been encountering and absorbing startling news for centuries.

As always, we encourage investors to continue focusing on their objectives rather than the distracting headlines.

If you have any questions regarding your portfolio report or the other items, please be in touch. As always, we welcome your suggestions and feedback and we value your trust and confidence.

Sincerely,

Byron E. Woodman, Jr.  

President

Lee C. McGowan, CFP®

Managing Director