Don’t panic over Brexit, experts say

labelled an overreaction by the market, Mark Appleton, South African head of multi-asset and strategy at Ashburton Investments, says markets don’t like the kind of uncertainty that Brexit introduces and investors will demand more for taking investment risk. This will cause the prices of shares and other risky assets to fall, but for you, as a long-term investor, the message is “don’t panic”.

Appleton says local stocks such as Steinhoff, which is exposed to the UK and Europe, Richemont, which faces cost increases as the Swiss franc appreciates gainst the euro, and BHP Billiton, which is affected by US dollar strength, may be negatively affected by Brexit.

However, like Old Mutual Multi-Managers, Ashburton is focused on quality shares that it expects will stand it in good stead in uncertain times.

Rob Price, economist at Investment Solutions, says while markets will be volatile in the short term, long-term outcomes will depend on the economic policies implemented in future.

If the new UK leaders implement constructive economic policies, the UK economy and the pound will quickly recover from this fall in confidence, and there won’t be an economic catastrophe. However, if the new leaders implement regressive economic policies that pander to specialinterest groups, this could push the UK economy – and its people – into dire conditions and they will look back on the Brexit decision with regret.

Financial markets could recover quickly if confidence is restored, he says. Although it won’t solve the political or economic problems, the Bank of England has pledged 345 billion pounds against any severely negative market events in an attempt to restore confidence.

Price says it is important to keep in mind that while currencies, shares and other assets can be volatile, over the long term they return to their fundamental values. This means that, as an investor, you should stick to your long-term investment plan, even when short-term outcomes in markets are volatile.

“History has shown that investors are driven by fear and greed, which, more often than not, means buying high and selling low,” he says.

Adopt a sound strategy based on your needs to avoid falling into this trap, he suggests.