Hot Issues
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SMSFs: Our 'hardest' jobs
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ASIC issues alert over big gaps in SMSF trustee knowledge
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Super savings gap for women stuck at 30%
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Statistics for all Australians
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Super set to play bigger retirement role
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Why SMSFs want estate-planning advice
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The power of financial role models
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Assess your retirement financial resources
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Cryptocurrency audits tipped to increase this EOFY
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Time to check your risk exposure?
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Some general interest stats on SMSFs
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Check trust deed to protect super in estate planning
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Survey reveals strong opposition to retirement system changes
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Australia by numbers – Update
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Federal Budget 2018 – Overview
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Your Budget
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4 components of our 2018 Federal Budget
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Tools to help you manage your financial position are available on our site.
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New rules capture SMSFs trading big with cryptocurrency
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Common EOFY slip-ups flagged for SMSFs
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Beware residency rules if moving overseas
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99 pct of SMSFs missing global opportunities
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How to plan for a better retirement
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Australia by numbers - Update
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Determine your retirement goals
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ATO issues update on cryptocurrency compliance traps
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How likely is a global trade war?
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Gig economy spike prompts calls for super policy changes
Article archive
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Quarter 2 April - June 2018
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Quarter 1 January - March 2018
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Quarter 4 October - December 2017
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Quarter 3 July - September 2017
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Quarter 2 April - June 2017
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Quarter 1 January - March 2017
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Quarter 4 October - December 2016
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Quarter 3 July - September 2016
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Quarter 2 April - June 2016
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Quarter 1 January - March 2016
Quarter 4 of, 2016 archive
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Investor habits: The good, the bad and the ugly
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Keeping finances in the family
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The inter-generational financial squeeze
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Merry Christmas for 2016, a Happy New Year and a prosperous 2017.
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ATO set to clamp down on range of super issues
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SME retirement plans in jeopardy, research finds
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SMSFs show restraint in hot residential market
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Investment's building blocks - always worth reinforcing
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Warnings issued on traps with CGT transitional rules
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Meet SMSFs' early and late arrivals
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Beware, the ATO is on the hunt for lifestyle assets
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'Brexit means Brexit' means what?
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SMSFs tipped to be hardest hit by pension changes
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SMSF assets hit record, but funds still hoarding cash
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Markets caution advised as economic bubbles loom
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Stretching retirement income
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Some financial terms explained
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Market Update – September 2016
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Checking in on our 2016 economic outlook - and looking ahead
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Making a fairer and more sustainable Superannuation System
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Going undercover
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‘Winners and Losers’ from new super proposals
'Brexit means Brexit' means what?

 

According to the United Kingdom's new Prime Minister, Theresa May, "Brexit means Brexit". But what does that mean?

       

 

What we know so far is that the outcome of the 23 June vote represents a huge shock to the UK economy. In all likelihood, the increase in uncertainty about what happens next is already causing firms and households to postpone some spending until the dust settles.

Admittedly, some of the more recent indicators have suggested that the immediate downturn is not as severe as many had feared. But it is still early days. In Vanguard's view, we still predict that the British economy will suffer from a sharp slowdown in the second half of 2016 and early 2017, and may well suffer an outright recession.

Whether this turns into something more protracted will depend on whether the newly composed UK Government opts to negotiate for a "Brexit-lite", preserving the benefit of single-market membership, or a more costly "Brexit-heavy" option which would likely involve immigration restrictions at the expense of a deterioration in UK-European Union trade relations.

At the moment, the Government is talking about negotiating the best deal possible for the UK, but at some point, the trade-offs will need to be acknowledged. What seems likely is that, politically, matters are likely to get more, not less, messy as the UK embarks on the process of extracting itself from EU membership.

Despite all this turmoil, and with the exception of the sharp fall in the value of the British pound, equity markets have actually performed relatively strongly since the Brexit vote. Fixed income markets have been boosted by the additional policy accommodation from the Bank of England.

Even so, in the face of this continuing market uncertainty, Vanguard continues to communicate the message that investors should be wary of making radical changes to their portfolios in an attempt to circumvent this uncertainty.

At times like these, it is important for investors not to lose sight of the long-term objectives that their portfolios are designed to achieve. By maintaining such a disciplined approach, this should serve investors well in navigating the stormy seas that we are currently sailing through.

 

Commentary by Peter Westaway, chief economist and head of investment strategy for Vanguard in Europe.
18 October 2016
www.vanguardinvestments.com.au