Financial advisers believe the sell-off in the FTSE 100 and FTSE 250 may represent a good buying opportunity but are advising clients to wait until clear winners and losers appear.
While some share prices tanked in the immediate aftermath of the Brexit vote, particularly banks such as Lloyds Banking Group, Barclays and Royal Bank of Scotland, which each saw drops in the share price of 30 per cent or more as markets opened on 24 June - the FTSE 100 itself has shown resilience, hovering at or just above the 6,000 mark.
The FTSE 250 has had a more torrid time, and was still down 7.7 per cent on 30 June, a week after the UK went to the polls.
For some investors, this has represented a buying opportunity.
Global funds and shares have prospered from the Brexit aftermath Andy ParsonsAccording to data from Bristol-based Hargreaves Lansdown, which is also listed on the FTSE 100, private investors placed four times as many share deals in the week after the vote to leave the European Union than in an average week.
Laith Khalaf, senior analyst for Hargreaves Lansdown, said: “It was a tumultuous week in the markets, full of price swings and contrasting fortunes.
“As we head into July we can expect more of the same, as the knock-on impact of the Brexit vote continues to ripple through financial markets.
“Global funds and shares have prospered from the Brexit aftermath, leaving UK domestic investments for dust, particularly those investing in small caps and mid caps, and financials.”
However, in a poll carried out among financial advisers by FTAdviser Advantage, 60 per cent of advisers believed it was still too early to call the winners and losers in the UK stockmarket.
Although shareprices have fallen across the board since the result of the referendum was announced on 24 June, advisers believe it could take weeks, if not months, before the real economic effect of Brexit begins to affect the bottom line of UK-listed corporations.
Only 40 per cent of advisers thought now was a good time for their clients to be dipping into the UK stockmarkets and picking up bargain prices.
Andy Parsons, head of investment research at The Share Centre, warned investors not to make irrational decisions either to sell or buy.
He said: “Investors need to take a step back and consider why they are investing. If the investment goal, and time frame associated with it, hasn’t changed and firmly remains in the future then my advice would be to sit tight.
“It is very easy to get swept up with the noise regarding crashing markets and subsequently panic. While selling may be the right course of action for some, for others holding off and taking stock may be more beneficial.
“It can be very painful looking at a sea of red figures within a portfolio, but unless you have to cash an investment in, remember it simply remains a paper loss and no loss or gain is realised until such time as encashment.”
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