Assets & Answers: Brexit’s impact

How will Brexit affect American retirement planning/funds, and how should people plan accordingly?

maurice quiroga, senior vice president, wells fargo private bank
The word ‘Brexit’ dominated the headlines at the end of the quarter as voters in the United Kingdom surprised politicians and pundits by voting to leave the European Union (EU). The resulting market turmoil left the British pound down sharply and international equities lower. This news capped a quarter in which the U.S. stock market recovered from its poor start to the year, international stocks continued to struggle, and the fixed income bond market rallied on the expectation that the Federal Reserve will stay “lower for longer.”

Following Brexit, I do not expect the Fed to hike rates this year, and I would expect there to be further market volatility associated with U.S. elections in the fall. Despite political and economic uncertainty, we expect growth through year-end to remain modestly positive.

While this news will create some noise in the markets, retirees should plan for increased volatility and uncertainty, and it is important to maintain a diversified portfolio with a disciplined rebalancing plan and set aside cash for short-term needs. If you’re planning for retirement, I recommend that you review your financial plan regularly and discuss any changes with your adviser so he can make sure your asset allocation remains consistent with your goals, risk tolerance, time horizon and liquidity needs.

marvin mitchell, president and CEO, compass retirement solutions
I consider Brexit a much needed wake-up call for retirees. Anyone who has followed the market has noticed that the stock market has been on a roller-coaster ride in the wake of Britain’s surprise June vote to leave the European Union. The market dipped very quickly but soon recovered. That’s why it’s very important not to panic and make bad, emotional decisions. It’s crucial to make levelheaded, logical decisions about your retirement nest egg.

Logically, we know that the market is at an all-time high. We are supposed to buy low and sell high. If you are in your 20s or 30s, it makes sense to continue to invest and ride the market out. However, if you’re retired or about to retire, this is not the time to hang in there thinking it’s only a ‘paper loss.’ The last two times we had an all-time high—in 2001 and 2008—the market fell afterward by more than 40 percent. My grandmother always said, “If you fool me once, it’s a shame on you; if you fool me twice, it’s a shame on me, but if you fool me three times … ” The definition of insanity is doing the same thing and expecting a different result. Since this is the third time the market has been at an all-time high in the last 16 years, don’t make the same mistake.