I really don’t like the end of the financial year. Markets tend to be more volatile as fund managers make end of year adjustments to portfolios and manage tax consequences. We have a federal election looming with both sides in full "scare the electorate silly" mode and all we are getting is tabloid talk. This now seems to be a common tactic and of course is great for the media, but can be very unsettling for the public.

And now the UK vote to leave the EU.

The Australian market fell 2.8% on the unexpected news as most had predicted the UK would vote to remain (The market was actually up 2% for the week until Friday). As the saying goes, be careful what you wish for!  But then again, the most searched item on Google was "what is the EU". This doesn’t really instil you with confidence that people were making well informed decisions based on rational analysis of the facts.

No wonder there is now a backlash with millions signing a petition that they want a second vote. The referendum is not actually legally binding in the UK parliament so it is clear that we will be in for a period of uncertainty and market volatility while they work through all of these issues.

Remember that volatility caused by irrational behaviour can also create opportunities and that markets can and do overreact. This is where the cash 'buffer' in a portfolio can be deployed.

While it affects sentiment here, the vote is unlikely to have a large impact on most Australian businesses or their profits and therefore share dividends. So before we react, it may be best to just pause, have a cup of British tea and wait for the dust to settle.


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Brett Dillon is an Authorised Representative (No: 265081) of Solar Financial Advisory Pty Ltd (AFSL No: 431915).
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