In a close vote, citizens of the UK have decided, after more than four decades, to leave the European Union. This significant change has sent shock waves throughout financial markets, particularly those outside the US. Is this a temporary decline or the start of something bigger?

The implications for the British economy are serious and may likely cause a recession to unfold across the UK, hence today’s significant decline in equity markets there and in the region. This also has a negative impact on some of the UK’s neighbors, most notably Germany. However, our view of this recent event is that it will have less of an impact on US markets and companies. Though US markets are sure to have a "bad day," we believe that the longer term effect on US based companies and markets is negligible – and in the shorter term may be a positive.

As you know, almost a year ago we significantly scaled back our exposure to foreign equities, mostly due to a lack of profitability. Lucky or smart, this helps on a day like today when foreign markets are declining quite substantially. In the short term, the volatility may enhance investors view of US based businesses and stocks, which would be helpful to us – that remains to be seen.

As we survey your portfolio’s stocks on this rougher than normal morning, it appears your positions are faring much better than foreign markets and better than US indexes. This is mostly due to the fact that we have already been in a more defensive mode prior to last night’s vote.

At some point, the decline in some European stocks may present a great opportunity, however the prudent investor should be patient about approaching that area of the world in the short term.

Though we do not think that Brexit will significantly damage your portfolio, we continue to manage this risk through your portfolio’s allocation to stocks, sector management and the use of carefully placed stop loss orders.

We hope this short update is helpful and we would caution against becoming overwhelmed with Brexit news, as it may have a lesser impact than the media would lead you to believe.

Please let us know if you have any questions or if you have experienced a significant change in your financial affairs. All of us on the team wish you a good weekend!