Keep Calm and Carry On

June 27, 2016 at 8:51 pm Leave a comment

The vote in the UK to leave the European Union took almost everyone by surprise.  Early last week, based on various polls, markets were rising in anticipation of the Remain vote.  As it turned out, the polls were wrong, and S&P500 is now down more than 6% from the top.

The current crisis in the markets reminds on of the one back in 2011, when U.S. credit rating was downgraded for the first time.  Just as no one really knows the effect of Brexit on the world economy, no one knew what that downgrade meant for the future.  As a result of the uncertainty, the market proceeded to decline by 17% from top to bottom that year.

Instead of worrying about the global economic ramifications of the U.S. credit downgrade, I asked myself the following questions.  As a result of that event, will I drink less coffee at Starbucks?  Or watch less Netflix?  Or order less stuff from Amazon?  The answers to these questions are quite clear and they should drive your investment decisions.  These questions are just as relevant today.

Many of you may not even remember U.S. credit downgrade.  Indeed, S&P is up nearly 60% since then.  While Brexit, if it actually happens, is not likely to be forgotten, it is futile to worry about the macroeconomic effects as no one can possibly know them.  Checking on your portfolio holdings will be 100 times useful.

Incidentally, U.K. credit rating was downgraded today.

Anyway, as they used to say in the U.K., keep calm and carry on.

Entry filed under: Uncategorized.

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Blog Author

Leon Shirman's long-term investment philosophy is summarized in his book, “42 Rules for Sensible Investing”, also available from Amazon.

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