Page 46 - Phonebox Magazine August 2016

As you may imagine, the most common question I was asked by clients up to 23rd June was ‘what will happen to the markets if we vote to leave the EU?’ Along with just about everybody else, I predicted an immediate fall but with a likely bounce back over the coming weeks/months due to to an initial over reaction. After the bounce back though, markets were likely to be lower than before the referendum.
Fast forward to today (11th July) and the markets have not behaved as expected. Yes, the initial response of the FTSE 100 was a fall, from 6,338 at the close on 23rd June to 5,982 at close of play on 27th June. However, it was nowhere near the level of decline predicted and furthermore, it not only bounced back from the fall but proceeded to continue to the point where is stands at 6,682 as I am writing this.
This constitutes a rise of 5.4% from the level before the result was known. I certainly didn’t see anyone predicting a response like that prior to the vote.
However, it is not all as it seems. The FTSE 100 is the most well know index for equities in the UK but it is dominated by a handful of huge companies and what happens to their share prices has a disproportionate e ect on the index. If we look at the Mid 250 index which is made up of the next largest 250 companies after the FTSE 100, we see a very di erent story. Rather than being above its pre vote level, it is down by 3.7%, which explains why many funds have not performed as well as might have been expected by simply using the FTSE 100 as a guide.
Where the market goes from here is very di cult to predict but it is unlikely to be boring!
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This article does not constitute advice and should not be taken as a recommendation to undertake any course of action mentioned without consulting a relevant professional.
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46 Phonebox Magazine | August 2016
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