Along with advisers, Fidelity, BlackRock and Vanguard urge investors to stay the course

But they're remarkably short on what to buy

Jun 27, 2016 @ 12:41 pm

By John Waggoner

The big fund companies and financial advisers are telling investors to stay the course and even to purchase stocks in the wake of the Brexit selloff, but they're remarkably short on what to buy.

The Dow Jones industrial average fell 610.33 points Friday, or 3.39%, making it the 8th-worst decline by points, and the 264th-worst by percentage, according to Standard & Poor's. A record $2.08 trillion in market value evaporated globally Friday, the largest amount ever. On Monday, the Dow closed fell further, dropping 260.51 points, or 1.5%, as the carnage from the Brexit decision continued.

Numbers like that get investors' attention, and the nation's largest fund companies and advisory firms quickly warned against making investment decisions in haste. “Although it is certainly worthwhile to keep abreast of global events such as the Brexit referendum, we caution investors against making tactical or short-term changes to their portfolios,” the Vanguard Group said on its web site. “Instead, we recommend following Vanguard's four core investment principles: create clear, appropriate goals; develop a suitable asset allocation using broadly diversified funds; minimize cost; and maintain perspective and long-term discipline.”

At archrival Fidelity, Jurrien Timmer, director of global macro, had some gloomy observations: Brexit was a vote against globalization, which won't be good either for price-to-earnings multiples or growth. Possible result: Stagflation, a period of rising inflation with low growth. On the plus side, Mr. Timmer wrote, stagflation will probably result in fiscal stimulus, either in the form of increased government spending or tax cuts. His conclusion: “If your plan was the right one the day before Brexit, it is still good the day after.”

At BlackRock's iShares, the advice was a bit more concrete, with the company noting that U.S. and Asia markets are only marginally affected by the U.K.'s exit from the E.U.

iShares recommends long-dated Treasury ETFs, including those that invest in Treasury Inflation-Protected Securities, or TIPS. They also recommended U.S. equities, with a preference for more defensive ETFs, such as those that pursue income or quality-stock strategies.

Individual advisers polled Friday by InvestmentNews said by a 96% margin that they planned to buy on Monday. Remarkably few offered any “recommendations, although one suggested buying domestic stocks that had been pushed down by the overall market reaction. Another suggested increased international exposure, on the assumption that stocks would be bargains.

“Activity across the U.K. and Europe will not cease,” ProVise Management wrote to customers. “Businesses and factories remain open. Trade continues. As such, Brexit seems unlikely to trigger a genuine crisis on its own, but certainly adds to issues of global instability and uncertainty that weigh on economic growth and investment returns.”

The Tampa-based planning firm noted that while rebalancing a portfolio wouldn't prevent losses, it could mitigate the risk that a portfolio drifts too far from its long-term risk/return objectives.

Of course, there are other remedies as well. One planner recommended a chocolate Frosty from Wendy's. Another: Jack Daniel's whiskey.

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