When the facts on the ground change, our risk management process mandates a response.

As active managers, we need the courage to make judgements about the future of market returns and the humility and processes to manage the size of our positions.  Currently, we are positive about stocks and corporate bonds relative to cash, and we believe non-US stocks offer better risk-reward strategically and tactically, (i.e. over the next five to seven years, and also over the next year). Risk management is often about increasing or reducing the size of a position because the odds have changed, even if one still believes the outcome will remain the same. Last week, we responded to a change in the odds of the UK remaining in the EU by reducing overall portfolio risk and our exposure to Europe specifically.  Following our trades, we still believe our portfolios are still positioned to benefit if the UK remains in the EU.  Thus, we have chosen to go into the vote with less riding on the outcome.

David Fuller's view

Here is a PDF of The Weekly View.

What a difference a few days can make in the odds of an important election.  I would not be surprised if RiverFront has added some additional market exposure in the last few days, although perhaps not in the UK and EU, having reduce those positions last week.

Today’s Referendum vote looks like a comfortable victory for Remain, judging from betting odds, the strength of GBP/USD which touched 1.4947 this morning, plus the continued strength of UK and EU stock markets this week.  Is this a case of buy the projected Remain victory expectations and sell the news next week?