Over the weekend we have seen markets react after the unexpected win by the “Leave” campaign in the UK Referendum on Friday, our time.  Markets were stronger going into the referendum, pricing in a “remain” result, so the overall falls for the week were cushioned.


As an active manager, Milford has been positioned for elevated levels of volatility and risk in 2016.   Milford remains a medium to long term investor and we do not believe that Brexit will have a sustained negative impact on financial markets over this period.


Brexit is a political issue with some short term financial implications, rather than a financial crisis.  The Referendum vote does not automatically exit the UK from the European Union.  There is likely to be at least two years of separation negotiation, with full separation not likely to occur until the September 2018 quarter.


As the dust settles and markets absorb the impact of the “leave” vote we expect to see more volatility, however, central banks around the world are expected to support financial markets if the situation worsens via supportive policies and lower interest rates.


Should financial conditions in the UK deteriorate over the coming months then we expect to see the Bank of England stepping in to ensure continued liquidity and market stability. They can do this by cutting interest rates and restarting Quantitative Easing.


Share markets will be volatile over the next few weeks and months but we don’t expect them to weaken substantially from here.


We will be cautious of share markets in Europe including the UK.  United States, Asian and Australian share markets look more attractive and potentially provide more opportunity post the Brexit vote. The New Zealand and Australian share markets are well placed to benefit from the continued hunt for yield. Our high dividend paying, stable, well run and capitalised companies will remain attractive for investors, both local and global.


At Milford we have taken steps to protect your funds from the impacts of Brexit by positioning our portfolios defensively over the past few months via holding elevated levels of cash, selling futures to profit when markets fall and continue to actively manage our currency hedging.  We continue to seek opportunities, at the right time, for investments in good quality companies.


Rest assured we will continue to work hard on your behalf to navigate conditions as the markets continue to digest the outcomes and seek to protect your capital during this time of uncertainty.


Thank you


The Milford Team

Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.