Brace for Brexit Market Volatility

Dear Friends,

We are now at the eve of Brexit referendum whereby the citizens of United Kingdom will vote whether they will remain or leave the European Union. The market has been extremely volatile for the past 3 weeks as major financial markets around the world (Stocks, Bonds and Currencies) have been gyrating close to 10%. As of now, the financial markets have reflected a "Stay" outcome even though the polls done just before UK goes to poll remains at a razor thin 50/50.

Although I believe that the "Stay" faction will prevail, I have extracted a part of an article on Bloomberg on what may happen should the "Leave" faction prevail. 

“The risk in the event of Brexit is so big it’s unhedgeable,” said Fabrizio Fiorini, chief investment officer at Aletti Getielle SGR SpA, which oversees $18 billion. “The impact could be as big as the collapse of Lehman Brothers, and I think the market has underestimated that.”

For Fiorini, a vote to leave would spur an exodus to the dollar and that would hurt China, sap commodity prices and spark disruptions in emerging markets. The trouble would then ripple through the global economy.

Our portfolio is positioned moderately defensive with 50% invested into USD cash fund and global diversified bond funds which will hedge against a potential disastrous "Leave" vote. On the other hand, should "Stay" prevails, the stock market will rally strongly and the USD position will probably be compromised. However, that is a scenario I rather see.

The poll results will start to filter in on 3am Singapore time and we will probably have a good idea which faction will be winning by the time we start work.

Meanwhile, I will continue on my watch and adjust my plans  on what to do with the portfolio as the results trickle in.

Stay Tuned.