OCM Wealth Management – Referendum Commentary

It has just been announced by the BBC that the UK has voted “Leave” and there is no way that the Stay campaign can mathematically get enough votes to win. The impact will be for sterling to fall in value and it is already looking like falling heavily and the global indices are already being impacted in Asia with futures forecasting the open in the UK being down circa 7% due to the sentiment of “What Next” for both the UK and Europe. We have no idea what will happen as the day progresses but it is going to be chaotic as central banks try to stabilise the markets. My key message to everyone is “you have no need to panic” as we have done everything we can to this point to de risk the portfolios and get ourselves in a position that means the risks are somewhat contained. We cannot guarantee that means they will not go down a little today as we still have assets invested, but with the asset allocation we have and the mandates the remaining asset managers have in the portfolio, the portfolios should be very stable.

 

We are therefore very happy that we have been in capital preservation mode and are now putting in positions to short the markets further at the open in Europe, which means we will make money as it falls for you. We already have an S&P position on the tactical portfolio that will do very well today as it will receive a return from the markets falling and from sterling depreciating. We will also buy Gold and Government Debt in the UK and US as both assets will benefit from the uncertainty and the movement in currencies for the US government debt. The only asset that we need to sell due to fact we are already in capital preservation mode is property and that was trimmed down last week. For any clients that have individual equity positions  or unlocked non-standard portfolio positions in funds that will have liquidity, the sale of those as per your discussion in previous weeks will be carried out as the market opens.

 

We will be busy for the next four or so hours and we will update later on what has happened and how it will impact the portfolios. Either way we expect the market neutral funds to hold values and benefit after some volatility initially, and the small long equity positions to be trimmed as we progress but overall we expect the portfolios to go up as the market declines significantly with the lows in February being breached by the end of today. As individual positions gives us gains we will review and lock in those gains as we progress through the next two weeks.