Dynamic Portfolio Manager Brexit Commentaires

Reprinted with permission from Dynamic Funds

In what is described as a historic and generational event, the U.K. has voted to leave the European Union. It becomes the first major country to decide to leave the bloc. As the geopolitical and economic impacts unfold, global financial markets have already reacted. Our portfolio managers provide their initial assessment.

Oscar Belaiche

This was definitely an unanticipated event where the financial markets and the odds makers were wrong. We have little direct exposure to Europe and the one U.K.-based utility security owned in Dynamic Strategic Yield Fund and also held in Dynamic Global Infrastructure Fund and other funds is up for the day and fully hedged versus the British pound. Securities we own are high quality with strong balance sheets and more predictable earnings so we are looking at this as a buying opportunity and indeed are selectively buying today.

We believe this event will reduce the likelihood of interest rate increases in the U.S., with the probability of a Fed Funds rate increase in December 2016 dropping from 50% to 8.5% overnight, and may put a damper on global economic growth.

Jason Gibbs

The most important thing in volatile times is sticking to a time tested process. We own quality businesses that deliver essential services. Dividends from these companies will continue to be paid and continue to grow. There have always been macro events that cause tumult, and there will be more in the future. The world is resilient and ultimately adapts and moves on. As always, those that stick to the process and focus on company specific fundamentals will win in the end.

Eric Benner

Global capital markets and local betting markets alike were sharply surprised by yesterday’s 52% to 48% outcome in favour of the U.K. leaving the European Union. The market’s reaction has been severe but mostly rational, with both the pound and U.K./European equity markets falling sharply on political and economic uncertainties, and U.K., U.S. and most global bonds rallying just as sharply on the assumption that central banks will respond vigorously to those uncertainties.

Within the U.K. and Europe, equity market reaction was starkly divergent for cyclical versus defensive sectors and for domestic versus global businesses. Once again, investing in quality businesses has proven to be a strong defense

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