Post-Brexit market strategies Canadian investors should know now

Canadian financial experts weigh in on what Brexit means for the Canadian investor

 
Trading floor with terminal showing big decline in the foreground
(Adrian Dennis/AFP/Getty)

This post has been updated.

In a historic turn events that has left investors around the world reeling, Britain voted to leave the European Union early Friday morning. The aftermath of the vote was swift and brutal: Prime Minister David Cameron resigned, global financial markets sold off sharply with a massive flight to quality, and the British pound dropped sharply to touch a three-decade low of $1.3229.

While the long-lasting effects of the decision remain to be seen (the process of Britain’s separation from the EU will occur over two years, and will begin in October), in the days and weeks to come volatility in the global markets is likely to remain high.

BMO economists Jennifer Lee and Benjamin Reitzes say that Brexit will be messy and will “act as a further dampener on North American growth.” Still, given the U.K.’s small trade share with Canada (it accounts for a mere 2.5% of Canadian trade), they believe that “the biggest loser from Brexit will be the U.K. itself.”

In the midst of this developing situation, Canadian financial experts give their take on what Canadian investors should do to secure their portfolios:


It’s too late to sell, it’s too early to buy

“It’s a little too late to buy insurance, or protective puts—the time to do that is, of course, before the fact. From a Canadian point of view, there’s not much that can be done at this point; you basically have to ride it out, because historically events like this do become long-term buying opportunities. I do think that Canadian investors should wait a while before they make up their minds. I have every confidence that the markets will work this out. Investors should wait it out, and in the weeks to come look for opportunities to buy strategically.”

— Elvis Picardo, Vice President of Research, Global Securities


If it ain’t broke, don’t fix it

“I think people should continue to stay calm—if you’ve got a properly diversified portfolio, which the bulk of people do, you’ve got bonds for a reason and you’ve got stocks for a reason. Part of the reason to have bonds is to have stability on days like this; government bonds provide that stability, and they’re acting like they should act, by providing that cushion to the equity volatility in your portfolio. There’s no reason really to alter things in most investment portfolios.”

— Patrick O’Toole, Vice President, Global Fixed Income, CIBC Asset Management


Keep calm and carry on

“Unless an investor was overweight [in investment] in Europe or the U.K., a knee-jerk reaction would not serve them well. Our country’s economic ties to the U.K. are very small; any direct impact to the Canadian economy or stock market appears to be very limited. From that perspective, when we see a bit of a drawdown in the Canadian marketplace today—which isn’t nearly as severe as what we’ve seen in Europe—I maintain the stay the course attitude. This is going to be a long and drawn out process for the U.K., and between now and then business carries on. If this remains isolated to the U.K., we could see a recovery in the markets in the next couple of days, to couple of weeks.”

— Philip Petursson, Chief Investment Strategist, Manulife Investments


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