Jean-Louis Nakamura, Chief Investment Officer of Lombard Odier Asia, has cautioned against extreme negative over-reaction to the news of the U.K.’s June 23 EU referendum results.
Global financial markets are currently experiencing extreme stress due to the decision of the British people to leave the European Union.
Jean-Louis Nakamura says in an interview with «CFC Innovation» the referendum was a scheduled binary event that, while unexpected in terms of its ultimate outcome, already motivated many market participants to prepare for the worst scenario in advance.
Putting Cash to Work
Therefore, and spite of the recent rally experienced in markets ahead of the polls, there is still a significant portion of cash (or hedged positions) in many balanced portfolios and there is an increasingly likelihood that the rapid correction in markets will build a strong case for putting this cash to work (or reducing the hedges further).
«We do not believe that we are starting a structural liquidity crisis of the nature or the magnitude of the ones experienced in 2008 or 2011,» notes Nakamura. «In fact, aggressive policy intervention or political progress in the rest of the EU membership could lead to a material reversal of market sentiment quite rapidly.»
