Most Canadian investors escape Brexit turmoil

The British pound started off the week trading at its lowest levels in 30 years amid fears it could sink even further in the days ahead.

Still, a financial advisor in St. John's says most Canadian investors will escape the turmoil.

"People invested in Japan or Europe saw falls as much as eight per cent," Larry Short of HollisWealth told CBC Radio's St. John's Morning Show.

"Normally when we have a shock like this … you get markets moving back and forth quite strongly."

While the fluctuation may be predictable, it has people on edge. Britain's chancellor of the exchequer called a news conference Monday morning to calm the waters.

"You should not underestimate our resolve," George Osborne told reporters. "We were prepared for the unexpected."

A message Short doesn't buy. "Why are you giving a briefing at 7a.m. if everything is fine and there's nothing to worry about?"

But it is true that stock markets in New York and Toronto didn't feel the impact nearly as much as those in other parts of the world.

"The Dow was down 3.39 per cent," Short said. "Toronto down just 1.7 per cent," thanks to the relative strength of gold, platinum, palladium and other resource stocks.

"It's been a good time to hold gold and cash. And oil has been doing well since January," Short said.

'Strange things are happening'

The advisor says Brexit serves as a reminder to anyone counting on investments to fund their retirement. You need a clear understanding of the ups and downs of a volatile market, and how much you can tolerate.

"Strange things are happening," he said, especially in politics.

"Who would think Alberta would elect an NDP government? And there's this Donald Trump character. And Brexit. "

Short says if you want to take advantage of the uncertainty in the EU, look where markets have been going and see what's been ignored.

"After 2009, the whole world went into stimulus mode. That is, they tried to stimulate their markets and stimulate their economy," he said.

"And to a large extent we've been having a tremendous amount of stimulus happening without dramatic results."

Wages have remained flat

The exception, he said, was the American unemployment rate, which dropped from 9 to 4.7 per cent. But for some reason we haven't seen the wage hikes that normally accompany a drop in unemployment.

"That's one of the reasons we're seeing such frustration and the rise of people like Donald Trump. Because wages haven't increased the way they have in the past."

If there's a silver lining, the Brexit turmoil has helped keep interest rates low. The American Federal Reserve saw trouble coming and trimmed back long-term predictions in its June statement. Rising interest rates are bad for bond funds, which are doing well now. They also tend to choke off commodity prices.

"The drop in the price of oil has put more money in consumers pockets than all the government stimulus plans since 2009," Short said. "We haven't see the other side of that. And the other side is growth."

Short said the small upward movement seen in commodities is the first indicator of economic growth.

But, he said, these are seasons of the unexpected.

"It's not the same market that it was five or 10 years ago," he said.

"If we keep going with this pattern, the Leafs could actually win the Stanley Cup," he joked.