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Financial Industry Insights from Advisors Asset Management
On June 20, 2016
Brexit = Hotel California… “You can check out anytime you like, but you can never leave!”
Issue: Britain will hold a stay/leave referendum vote on its European Union (EU) membership on June 23, 2016. The primary issues that have led to this vote relate to Britain’s concerns over the lack of control over regulation, how funds are disbursed within the European Union, and immigration control.
Pros of leaving the Union:
Cons of leaving the Union:
Our opinion:
The current vote on whether to leave or stay in the EU has become very close over the last couple of weeks. As we get to June 23, the ultimate deciding factor on the fate of this issue will be the undecided voter. We believe the decision will ultimately reside with staying in the EU. A vote to exit could create an economic recession, a significant stock market and currency correction and a pickup in unemployment. We think as the undecided voters consider these issues, they will vote to remain. If previous referendums are a guide in the UK, the vote has been for the status quo. However, if the vote is to “check out” we feel the UK would still not be able to “leave” due to the political and economic constraints of becoming globally irrelevant.
As for portfolio implications, our observation over the years is that these type of events will come and go. Granted some have more impact on short-term volatility in the markets. But longer term, they tend to have less effect. We have been overweight the Euro area versus the index for some time now, and will continue to do so. We believe the region is attractive based on our work and overall we like the improvements we've seen taking place in Europe.
2016-0620-5419 R
Opinions in this piece are those of Todd Asset Management and are not necessarily that of AAM.
This commentary is for informational purposes only. All investments are subject to risk and past performance is no guarantee of future results. Please see the Disclosures webpage for additional risk information. For additional commentary or financial resources, please visit www.aamlive.com.
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