Asset Allocation Update – Brexit Brief: The EU Hokey Cokey
In retrospect, history may show that the ‘peak of Brexit fear’ was recorded last week, but what is clear, is the complacency in markets globally which was widespread, is no more. Roll on the weekend though, and at the time of writing, (Monday 20th June) it would appear that the momentum behind ‘Brexit’ has stalled again.
We feel as asset allocators the situation remains too close to call. If pushed, we do ultimately expect the ‘Bremain’ campaign to prevail marginally. If that does transpire, we would expect that the FTSE 100 saw its lows last week at 5900, and sterling at 1.40 against the US Dollar.
The BoA Merrill Lynch Fund Manager Survey reports that fund managers are holding 5.7% cash in June, higher than at any point since 2001. Belatedly, investors have begun to prepare for the worst.
Should risk appetite return, we would not be surprised by a rally to new highs in markets and beyond – there is abundant cash on the side lines which sits as propellant fuel in waiting.
We did reduce defensive positioning last week as the ‘Leave vote’ gained momentum and markets reacted negatively in sympathy, but we have substantial dry powder ready to deploy swiftly as the results become clear.
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About ARIA Capital Management
ARIA Capital Management is a fully integrated company offering wealth management, fund management, stockbroking and structured investments, with a focus on absolute return investing. It is authorised and regulated by the Financial Conduct Authority in the UK, and has offices in London and Dubai.