August 05, 2016
The United Kingdom’s surprising decision to exit the European Union (EU) on June 23, 2016, has now left the world waiting for next steps — on both the economic and political fronts. As investors wait for politicians’ decisions, this event risk is likely to cause markets to experience increased volatility and drag on global economic growth. Individual investors as well are likely now struggling with their own responses to this crisis and elevated market volatility.
“In light of these developments, U.S. Bank believes the best course is to continue to use well-diversified portfolios of stocks, bonds, commodities and real estate to diversify the current event risks and to remain on track with long-term needs and goals,” says Robert Haworth, Senior Investment Strategist for U.S. Bank Wealth Management.
New political leadership
The political issues will take time to unfold, Haworth says.
The first, most visible change is the emergence of fresh political leadership in the United Kingdom under the new prime minister, Theresa May, following the resignation of Prime Minister David Cameron. From here, the new government can decide if or when to initiate the withdrawal process from the EU.
Once the United Kingdom formally notifies the EU of its intent to withdraw, there is a two-year negotiation period, which can be extended by unanimous vote.