Susan Jung |

A tentative agreement was reached between the United Kingdom and the European Union (EU) for the terms of the United Kingdom withdrawing from the EU. The current government has been pushing to finally take action endorsed by voters several years ago.

The current United Kingdom administration believes that an independent Great Britain is better off on its own then part of an overall union of economies. Taxation, immigration, the desire to avoid subsidizing poor countries, and sovereignty have been the main drivers for the United Kingdom’s desire to exit the union.

If an orderly exit is agreed upon as suggested by the recent announcement this week, this would be a relief to markets as a disorderly exit was feared by many as causing potential economic chaos. In fact, many businesses have already relocated outside of Great Britain because of the uncertainty related to this issue. In particular, Canary Wharf (which houses many financial institutions,) has experienced an exodus of large international companies seeking to avoid Brexit uncertainty.

An agreement to avoid chaos is a positive development for investors. Markets hate uncertainty and one of the overhangs on a global basis has been the headlines related to these negotiations. While plenty of uncertainty remains, it is easier to discern the impact on economies if the rules going forward regarding political and country sovereignty are better understood. Assuming this agreement is passed by Parliament, we see this as a positive for the global economy and markets.

We have continued to underweight our international assets in portfolio strategies relative to our standard targets. However, it is an unavoidable fact that any multinational investment by default captures the global economy. In a world without economic borders, buying any asset domiciled in a particular country does not necessarily mean you are investing only in that country’s economy. US multinationals derive significant revenue from across the world. For this reason, though we are underweighting our standard international asset allocation target levels, we still have international exposure in portfolios through the revenues derived from global focused companies.

We live in an interconnected world where boundaries on an economic basis are collapsing on a consistent basis. Our economic analysis is focused not just on US metrics but other data points from around the world. This is a key differentiation of DWM. We recognize this is an important issue and invest the time and resources to keep abreast of global developments.

As always, we will adjust as needed given current and expected headlines. If you have any questions about this information, please let us know. Always here to help.

The opinions expressed herein are provided for informational purposes only and are not intended as investment advice. All investments involve risk, including loss of principal invested. Past performance does not guarantee future performance. Individual client accounts may vary. Although the information provided to you on this site is obtained or compiled from sources we believe to be reliable, Destination Wealth Management cannot and does not guarantee the accuracy, validity, timeliness or completeness of any information or data made available to you for any particular purpose. Any links to other websites are used at your own risk.