10th October 2016

Investing in the EU: Is it Safe Post-Brexit?

Brexit certainly sent shockwaves through the world economy. A decision that very few people expected, Brexit certainly had quite large ramifications

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Investing in the EU: Is it Safe Post-Brexit?

Brexit certainly sent shockwaves through the world economy. A decision that very few people expected, Brexit certainly had quite large ramifications. However, more than a month on, the dust is now certainly setting, which allows us to assess the post-Brexit landscape. So, with this in mind, is investing in the EU post-Brexit safe? And how can you protect yourself? In this post, we take a look at how the markets reacted to the announcement and whether you should invest.

Immediately, Markets Tanked but is this the Best Time to Sell?

There’s no way to sugar-coat this, the market went into absolute panic and meltdown immediately after the news of a Brexit broke. As such, those who owned stocks and shares became incredibly tetchy, panicking and fleeing the markets in an attempt to minimise losses. As a result, on the Friday and Monday following Brexit, US stocks lost $1.4 trillion. The FTSE fell by almost 10%, and the pound fell to $1.28, the lowest level since the 1980s.

However, although these numbers are definitely incredibly bad, it’s also important to not get lost in short-termism. Nobody predicted the Brexit result, which means that there’s very little point discussing how many people could have sold before the decision was announced. Almost all analysts as well as pollsters and betting markets were confidently a remain vote, so for many, a bounce was expected on Friday morning, rather than devastating losses.

Rebounds for Those That Held Their Positions

Although the losses were certainly dramatic, those who didn’t panic were rewarded on subsequent days when stocks rebounded almost as quickly as they fell. For example, the Stoxx 600, a Europe-wide index, made up almost all of the 11% that it lost post-Brexit and the FTSE 100, which reached staggering depths, almost recovered to a yearly high.

Is it Safe to Invest?

As such, although there was still a great amount of uncertainty, opportunities to trade arose. In an increasingly globalised world, many traders remain understandably worried about Britain leaving the EU, breaking the cycle and sending shockwaves. However, opportunities are still present, and investing in the EU is far from unsafe, as the above gains show. So, with this in mind, what trading strategies can you adopt to help navigate the volatility and ensure that you can make money in these uncertain times?

Go Small – Although opportunities are arising, volatility breeds uncertainty, and this can lead to large market movements. As such, be cautious with your investment decisions and really consider the amount that you invest. Trading smaller amounts may lead to lower profits, but it can also help safeguard you from big movements and prevent you from being wiped out.

Think of the Long Term – Although volatility can allow you to gain money in seconds, you can lose it all, too. Instead of cashing out when the going gets tough, consider long term investments where you can ride out the volatility and be confident that you’ll be better off in three to five years. Not every trade has to be a ‘quick win’.

Don’t Follow the Crowd – In times of uncertainty, it can be easy to adopt a herd mentality and follow the crowds. However, this breeds volatility and could lead to you making a decision you’ll later regret. Instead, stick with your trading strategy. After all, it’s got you this far.

Monitor Markets More Closely than Ever Before – Economic indicators can give you more information than ever before at times like this, so monitor the calendar closely. The Federal Reserve, the Bank of England and the EU itself will all be making announcements, and simply monitoring an economic calendar, such as the one offered by Hantec, can make sure you’re abreast of them.

To conclude, although losses were huge in the markets following Brexit, many large recoveries have since been made. As such, investing is dangerous but not impossible. Follow these trading tips, and you could make money from the volatility.

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