FTSE Fall is Buying Opportunity

27th June 2016

Richard Potts, partner at Irwin Mitchell Asset Management, said: -The vote for the UK to leave the EU has triggered a big fall in the FTSE 100 as investors react to the result.

However, this decline will probably present good buying opportunities for investors. The fall in the value of sterling will benefit those companies with large overseas earnings. As many of these companies are large and overseas earnings represent a significant proportion of companies in the FTSE, this boost to earnings could attract buyers. Coupled with this is that the economic implications of Leave will take many years to unfold could see a quick recovery from any initial sell off.   Bond markets are likely to rally further as investors seek safe haven assets during a period of uncertainty. It is possible that longer dated bonds will not prosper in the longer term as weaker sterling translates into higher inflation and foreign investors who typically buy longer bonds desert all UK markets. -We have a taken a defensive stance in our portfolios. Overseas earners are a significant proportion of our holdings with domestic focused stocks relatively under-weighted. High yielding stocks, where we have a large allocation will see falls in capital value that are likely to be temporary but their dividend paying capability will remain relative unaffected.

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