This is a common trap that investors fall into. Another is panicking in choppy markets and crystalising losses – something it would have been very easy to do on Friday morning, and again on Monday, when markets reacted to the unexpected Brexit news – the FTSE 100 and 250 have since recovered 8 and 6 per cent respectively. My own defensively slanted portfolio actually rose over the last week, as has my colleague James Norrington’s, built using ETFs on the principles of asset allocation. A lesson to learn is that you should have a plan, and stick to it.
Of course the fear remains, as some appear to revel in telling us, that we have essentially just voted for a recession, and that the experts making the economic case against Brexit, so loathed by Michael Gove, were right all along. Surely it’s too early to say - we have had four days trading and one weekend since the result, and will not know whether we have suffered a recession for some time. Certainly the profit warnings we have seen so far appear to be using Brexit as cover for bad news that reflects more fundamental problems.
That’s not to say we won't experience a downturn, and that Brexit-related uncertainty could deepen it. On page 18 Bearbull suggests that the hit to property wealth alone could leave us poorer, but equally accepts that globalisation of which the EU is part has left many in the UK poorer already. This is a secular trend, not the regular pendulum of a business cycle. And it is this long-ignored problem which has created the sentiment that fertilised anti-EU hostility, an issue we should think about carefully rather than crassly branding the Brexit-inclined working classes - from which I am only a generation removed - ignorant and bigoted, and whose votes are somehow worth less. For some of us the referendum was, after all, a vote to protect democracy.
If Brexit brings about a fairer, more inclusive society, than we should all be cheering. I still gasp when I see how much some directors are paid, and the ludicrous ways in which it is justified. As shareholders we can express our anger, but these advisory votes are rarely followed in practice. Chris Dillow suggests that a rise in workers’ wages could make shares less attractive – but as our contributor Todd Wenning argued last week, companies that run a culture of fairness often make better investments anyway. Perhaps a fairer Britain will, too, become an even better place to invest in the years ahead.
