Talking to clients after initial Brexit scare
Sorry advisers, the Brexit crisis might not be just another short-term market jolt.
"It's impossible to be sanguine about this one," says Greg Valliere, chief strategist for Horizon Investments. "[Brexit] looks like a dark cloud that's not going to dissipate anytime soon."
While it's important for planners not to sugarcoat a troubling international scenario, Valliere, a veteran Washington commentator who speaks frequently at industry conferences, also stresses that they can reassure clients that the United States is "a very attractive place to invest."
"Advisers can be candid with their clients without frightening them," Valliere says.
In the wake of Britain's vote to leave the EU, there are two big risks that planners should be prepared to discuss between themselves, and their clientele, according to Valliere.
"First, does the crisis metastasize across the continent? Will there now be votes in Italy and Spain? France scheduling a vote to opt out of the EU would be the ultimate train wreck scenario,” Valliere says.
"The other risk is that global economic growth slumps,” he adds. “Will it happen in the UK? Yes. Europe? Maybe. The U.S.? Possibly. So much about the global economy is based on confidence, and business investments are already down. I can't see business taking the plunge now amid so much uncertainty, and consumers may also decide to retrench."
ULTRALOW INTEREST RATES SEEN
But advisers can assuage some client fears by pointing to positive developments, such as low interest rates and a strong domestic economy, Valliere says.
"It's hard not to come to the conclusion that we're going to see ultralow interest rates for the foreseeable future," Valliere maintains. "If advisers have clients looking to re-finance, they will many months to go."
The U.S. economy can also be viewed favorably when reviewing portfolios, Valliere says.
"GDP is expected to be around 2.5% to 3% this quarter," he noted. "Virtually all experts believe that the U.S. economy is not close to a recession. And [Fed chair Janet] Yellin is determined to keep the economy growing moderately and I have great faith in her."