Brexit is a suboptimal outcome that will be bad for both the UK and the EU. To keep the rest of the union together, the EU will be in no mood to be generous in negotiations to sever ties with Britain. We assume this will lead to slower growth over the short- to medium-term, and the uncertainty will weigh on the market.
Once the dust settles, investors will return to fundamentals. We suspect this might lead to good opportunities to buy high quality companies at attractive valuations.
We are likely to see more money flowing to global companies and dollar earners. We are also likely to see underperformance in UK-focused businesses, including banks and home builders, where we do not have any exposure. Active managers should have a good opportunity to outperform.
We do not organize our portfolio for a particular economic regime. We are deliberately and insistently micro-economists and long-term investors with an average hold period of 10 years. We dare not speculate on what the state of the macro economy will be 10 years from now. Our mission is finding good values among companies producing goods or services in advantaged industries that are being carried along by secular, not cyclical, forces.
Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. Investments in securities of growth companies may be volatile. Mid-sized company stock is typically more volatile than that of larger company stock. It may take a substantial period of time to realize a gain on an investment in a mid-sized company, if any gain is realized at all. Diversification does not guarantee profit or protect against loss.
Mutual funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.