{"id":3434,"date":"2016-08-12T17:33:11","date_gmt":"2016-08-12T21:33:11","guid":{"rendered":"http:\/\/162.223.13.186\/~zacksim\/brexit-ends-the-bank-of-englands-seven-year-streak\/"},"modified":"2022-02-26T13:20:55","modified_gmt":"2022-02-26T13:20:55","slug":"brexit-ends-the-bank-of-englands-seven-year-streak","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/brexit-ends-the-bank-of-englands-seven-year-streak\/","title":{"rendered":"Brexit Ends the Bank of England\u2019s Seven Year Streak"},"content":{"rendered":"<p>Following the UK\u2019s vote to leave the EU, exchange rates for the pound have fallen and the outlook for growth in the short to medium term has weakened strikingly.<\/p>\n<p>Amidst mounting signs that quitting the EU may have an adverse impact on the UK economy, on August 4 the Bank of England (BOE) unveiled its financial stimulus to support growth. This package includes cutting interest rates <em>for the first time in seven years<\/em> to a new historic low of 0.25% (according to Trading Economics).<\/p>\n<p><strong>Additional stimulus package measures include<\/strong>:<\/p>\n<ul>\n<li>A new \u2018Term Funding Scheme\u2019 to reinforce the pass-through of the bank rate cut<\/li>\n<li>The purchase of up to \u00a310 billion of UK corporate bonds<\/li>\n<li>An expansion of the asset purchase scheme for UK government bonds of \u00a360 billion, taking the total stock of these asset purchases to \u00a3435 billion (according to Trading Economics).<\/li>\n<\/ul>\n<p>The BOE Governor defended the bank\u2019s decision to cut the interest rates and implement other policy measures, by claiming that the UK\u2019s economic outlook post-Brexit has deteriorated remarkably, and that the economy has shrunken at its fastest pace since the last time the Bank of England lowered rates. Indeed, many economic indicators have fallen significantly, in most cases to levels last seen during the financial crisis and in some cases to all-time lows.<\/p>\n<p>In such a scenario these measures are proactive efforts to reduce uncertainty, reinforce confidence, stem the probability of recession and support the necessary adjustments in the UK economy. The BOE also indicated that, if necessary, all elements of the stimulus package can be further intensified, including another rate cut close to zero.<\/p>\n<p><strong>Bottom Line for Investors<\/strong><\/p>\n<p>With the central bank cutting its 2017 growth forecast to 0.8% (compared to the previous forecast of 2.3%), mounting uncertainties about future growth among businesses and predictions for rising unemployment next year, most economists believe that current policy isn\u2019t sufficient enough to foster any sustainable economic growth in the coming quarters.<\/p>\n<p>Lower interest rates may also have the adverse effect of hitting pension funds substantially, meaning annuities could provide an even lower income when people retire. On the other hand, further weakness in the pound may boost exports and provide relief to multinationals\u2014to the extent that they do business outside of the EU. Time will tell how resilient the UK\u2019s economy can be under the pressure of change, and investors can only hope that the outcome is slightly better than expected. With expectations so dour at this stage, it gives more room to that possibility.<\/p>\n<p>So, what does this mean in terms of investment strategy? It\u2019s common for investors to overestimate their ability to stay steady over the long-term, especially when markets turn volatile. Instead of putting your nerves on a nail-biting roller-coaster of ups and downs as we wait to see how the UK\u2019s economy will withstand its current situation. Ask yourself, \u201cdo my asset allocations reflect my personal risk and reward equation?\u201d At Zacks Investment Management, our focus is on risk-adjusted returns to optimize for this equation as defined by you. Know too that Morningstar currently ranks five of our investment strategies in the top 10% of their respective classes (as of 6\/30\/16)\u2014we call this our \u201cDean\u2019s List.\u201d Learn more about these strategies and how they might steady your nerves by clicking below\u2026<\/p>\n<p style=\"text-align: center;\">\n","protected":false},"excerpt":{"rendered":"<p>Following the UK\u2019s vote to leave the EU, exchange rates for the pound have fallen and the outlook for growth [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4124,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[67,71,72],"tags":[],"class_list":["post-3434","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-offer-deans-list","category-private-client-group","category-steady-investor-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3434","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3434"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3434\/revisions"}],"predecessor-version":[{"id":11227,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3434\/revisions\/11227"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3434"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3434"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}