Head for the Brexit...mmm...Exit!!! - June 2016 Commentary

What do you think the chances are of our world NOT PANICKING after they have known about the Brexit vote at least since the beginning of the year? Right, none. That is how our financial world seems to operate today: shoot, ready, aim. It makes no sense whatsoever! Make no mistake, the Brexit is complicated by multiple factors, but those hurdles were available to panic over months ago. The truth is that there is no need to panic. There are logistics issues with whom is currently running the U.K. now that David Cameron has stepped down as Prime Minister. Also, there are noises being made by other countries in the EU that supposedly would like to leave as well. Finally, there are real world issues with a much lower British Pound Sterling and a higher U.S. Dollar. The only way parity is achieved is through Pound value erosion verses Dollar inflation. The net sum of possible Brexit outcomes for the good people of the U.K. is as follows: a weaker pound can lead to higher inflation. With higher inflation, either wages can rise to compensate for the price increases, or wages won’t rise and people’s standard of living will decline. Therefore, ironically, the outcome of the vote to leave the EU resulting in a lower quality of life is a real possibility. There are also additional compromises and possible votes and politics on the table all of which could inevitably be destabilizing for the global financial markets.

Nevertheless, in our opinion, this will mean very little for our clients. Many of our recent additions are even higher in the middle of this maelstrom. A.G. Campbell Advisory, LLC thinks that the “Brexit” is probably a future pain in certain ways for the short term, but we don’t think it is “the earth threatening” storm cloud on the horizon. In fact, we think that the news people and clients should be much more worried about an overall global GDP slowdown that may throw us eventually into a recession. The only panacea for all of these financial ills are tax reform and a more business friendly environment.

Our advice on top of all of this information is simple: don’t listen to the “noise” of the financial markets, this “noise” will not help you in the long-term. Our clients are incredibly well diversified and positioned with cash and bonds. We can weather all kinds of storms. So, we think the best thing you can do with your time right now is something else. If there are opportunities created by the volatility, we will find them. Finally, as it relates to the Brexit, ISIS, or any other concerns we may have, the words of former president Franklin D. Roosevelt addressed in 1933 at his Inauguration, “…the only thing we have to fear is fear itself.“ This philosophy is not bravado, and today it is just as valid as it was at that time. I wish all of you a relaxing and carefree summer.

Zandy Campbell

Mark Scott

A.G. Campbell Advisory, LLC, 1340 Smith Avenue, Suite 200, Baltimore, MD 21209