Three months since Brexit vote - how has the market fared?

Brexit flags

It’s been three months since Britain voted to leave the EU, and even though the actual leaving process is still to begin, the stock markets have responded.

We take a look at what investments have performed well, which have sunk, and which just look too unpleasant to be around.

The good

All the financial news from China lately has been gloomy, with fears over a ‘hard landing’ after its extraordinary growth since the early nineties, yet Chinese funds have returned double-digit figures thanks to a weakening pound and Hong Kong’s Hang Seng index rocketing into the stratosphere in the last three months.


Closer to home, the FTSE 100 index of the largest companies listed on the London Stock Exchange has defied all expectations and risen to record-breaking heights. This has been aided by the companies listed operating on a global basis, and therefore being well placed to exploit the lowering pound and take higher profits than they would usually.

Laith Khalaf, senior analyst at Hargreaves Lansdown comments: “The UK stock market has the advantage of being populated by truly global companies, and so the fortunes of the UK economy are only one driver of returns. In the short run there is no telling which way the stock market is heading, but for long term investors there are really very few other options for harvesting a decent return, given the low returns now available on cash and bonds.”

It would be tempting to see the FTSE 100’s huge rise as something irrational and a prime suspect for correction. But Lee Wild, head of equity strategy at stock broker Interactive Investor (Moneywise’s parent company), says: “With interest rates at record lows and sterling in freefall, savvy investors piled into big overseas earners paying fat dividends. However, the rally has also pushed valuations much higher and some stocks now look very expensive versus historic norms.

“Clearly, the question being asked by investors is can the rally continue. The answer is yes. True, there is still plenty of uncertainty around what Brexit will eventually look like, and it could easily trigger a major stock market correction. There's a US presidential election in November and a referendum on constitutional reform in Italy weeks later, the importance of which is currently underestimated by markets.”

However, despite the UK doing so well, as you can see below, Chinese funds dominate, according to Hargreaves Landsdown’s top 10 strongest performing funds since the referendum vote:

Fund name Total return since 23 June 2016
Julius Baer EF China Evolution 37.30%
WAY Charteris Gold & Precious Metals 37.20%
JPM Brazil Equity 35.70%
Henderson China Opportunities 35.40%
Old Mutual Henderson China Opportunities 35.30%
Junior Gold 35.00%
Henderson HF China 35.00%
Neptune China 34.50%
HSBC Chinese Equity 33.90%
Candriam Equities L Biotechnology 33.60%

Source: Lipper Hindsight.

The bad

For Britons hoping to eke out a bit more of the summer by heading abroad, the fall in value of the pound is a worry.

Due to the way currencies work, traveling to Europe is now 12% more expensive than it was on 23 June, and if you’re off to the US, it’s 14% more expensive. The pound really has taken a battering, and it doesn’t look to get any better soon.

Mark Taylor, CEO of investment platform Selftrade says: “The other issue weighing on Sterling sentiment is the Bank of England. Despite no change being delivered at the September policy meeting markets continue to anticipate another interest rate cut in November.”

Currency pair 23-Jun-16 22-Sep-16
USD/GBP 1.4877 1.3078
EUR/GBP 1.3072 1.1669

Data from Bloomberg.

The ugly

Property funds are having a turbulent time. Moneywise reported back in early July that many property funds were suspending trading over fears that too many people would try to extract their investments - fears well-founded considering that by August over £3.5bn had been withdrawn from UK funds as a whole

Despite some property funds getting back onto an even keel and re-opening trading or removing exit penalty charges, the fact of the matter is that, according to figures from Hargreaves Lansdown, out of the bottom 10 performing funds since the referendum vote, seven are property funds. See the table below for its findings:

Fund name Total return since 23 June 2016
Legal & General UK Property -3.90%
Aberdeen UK Property -4.50%
SF Webb Capital Smaller Companies Growth -4.50%
Henderson UK Property -4.60%
SLI UK Real Estate Retail -5.50%
M&G Property Portfolio Sterling -5.80%
Elite Webb Smaller Companies Income & Growth -5.90%
Aviva Investors Property Trust -6.20%
FP Argonaut Absolute Return -6.60%
Kames Property Income -8.80%

Source: Lipper Hindsight.

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