400 years of Shakespeare and we are still pondering over the question!
I recently returned from London, more specifically the City of London, and was rather perplexed to find out that the financial sages were still in a state of flux, arguing over the theoretical economical fall out, on the day after of the fast approaching “In or Out” referendum.
I came to the conclusion, after pouring through rims of editorial columns from “would be” financial gurus prognosis relating to the likely impact on the FTSE100 (The Financial Times Stock Exchange index of the largest 100 publically quoted companies in UK) on the 24th of June, the day after. The general consensus converged on a simple equation; if the “In” campaign wins the day, there would be an immediate 5% appreciation in the FTSE100. Conversely if the “Out” campaign has it, the FTSE100 would suffer a dramatic 10% loss.
And what of the recovery? Well the jury/prophets are still out on determining what will be the next cog to fall off the UK wheel of fortune, will it be Scotland lifting up its kilt and diving into the coffers of the ECB vaults to fill its sporran with €€€€€€? Or will it be our “Special Friend”, the USA, stripping our 51st state status (England already feeling cold, being kilt less), Barracking at number 10 to get to the end of the queue so that USA and EU get on with signing a Free Trade Agreement. Will England finally be the little Island sailing on Britannia waves with its head kicked off to wonder off into oblivion with it’s much cherished devalued ££££££.
Assimilating such a scenario gave rise to an acute headache, and whilst the above doomsday scenario is most unluckily to happen, says who I’m no betting man, not all the pundits have shown their hand. The mear thought sent a cold shiver down my spine because the FTSE100 is far more than an index. The FTSE100 Company represents circa 81% of the entire market capitalisation of the London Stock Exchange (Market Cap over 2 Trillion) and is by far the most widely used UK stock market indicator. More pertinent the FTSE100 is unequivocally the emphatic barometer of the overall UK economy. Therefore an “Out” scenario would send shock waves far beyond the shores of our little Island and would not resonate too favourably with our trading partners.
Tumultuous Debacle
Many decades ago a detachment from mainland Europe would cause an upheaval yes, but wouldn’t be unsurmountable. Our primordial ties with our cousins across the pond and the Common Wealth were at their pinnacle point. The USA alone, many moons ago, was home to 60% of our exports. Some of our industrial conglomerates, such as The Hanson Trust, forged great alliances with the USA. Today the scenario has inversed with mainland Europe now accounting for 60% of our exports, not mention the unravelling of ourselves out of the political conundrum of EU bylaws. EU laws now account to 2/3 of our unwritten constitution, sounds rather bizarre doesn’t it?
With little over two months to “D” day what should one do with our investments, is the question I get asked most frequently these days. My stock answer is similar to the old Estate Agent answer to everything “Location, Location, Location”, and mine is “Diversify, Diversify, and Diversify”.
The business world is indeed intertwined but the financial world has peculiar difference, its speed of change is like no other industry, its works at “Keyboard Speed”. If the outcome on the 23rd of June is to leave then on the 24th traders will press the “Sell Key” and in seconds vast fortunes of people’s hard earned money will be wiped of the face of the map.
Blacktower Financial Management (International) Ltd
Address: Edificio Mapro, Estrada Quinta do Lago, 8135-106 Almancil
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