How U.S. Investors Should Respond in the Post-Brexit World

The outcome of this summer's 's Brexit vote was shocking to many observers.

It also had an immediate impact on the British economy and beyond. 

The pound has dropped to 1.31 for a U.S. dollar and broken a 20-year support level at 1.40 per dollar. This reading is its lowest since 1985 and will affect multi-national corporations that are selling to British companies and consumers. Mortgage rates have tumbled. 

But the long-term impact may be even more significant. That's understandable given the size of the British economy. 

Great Britain will no longer be part of various trade agreements that the E.U. has with the rest of the world and that have benefited the country. That includes the trade zone within Europe. The E.U. accounts for roughly 44% of the U.K.'s exports and 53% of imports.  

As a result, Standard & Poor has lowered the U.K. AAA debt rating to a AA rating, making borrowing in the world markets even more expensive for the U.K. 

What Brexit Means for the U.S. and What You Should Do

The likelihood of slower growth throughout Europe and a weakening euro will put added pressure on the U.S. to keep interest rates low. The Federal Reserve has shown little inclination to add to its small rate hike of last December. 

"As (the) Fed meets, no rate hike is expected until late this year," said one recent report. "Many lenders have been in this camp of maintaining that the Fed would not raise rates for the remainder of this year and that continues to be the case.  This change has directed lenders to remain committed to an intermediate bond exposure in high quality municipal bonds and other fixed income alternatives in markets that provide great value."

Expect mortgage rates to remain low and that home sales will be robust in the short-term. "These extremely low mortgage rates should support solid home sales and refinancing volume this summer," said Sean Becketti, Freddie Mac chief economist, in a recent statement

Beckitt added that he "didn't expect any significant movement in mortgage rates in the near-term."

Current and potential homeowners may want to lock in a great rate now. 

Meanwhile, U.S. investors will likely focus on high quality companies with defensible franchises, strong cash positions, and low debt.

Yet it's important for investors to evaluate their portfolios to ensure that they are meeting their goals and that they can be adapted to address changing conditions. The latter characteristic is particularly important in the uncertain aftermath of Brexit, and given the coming presidential election. 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned. Bill Loftus at LLBH Private Wealth Management contributed to the creation of this article.

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