Traders and fund managers have a tough time ahead of them after Britain voted for a Brexit — a British exit from the European Union.
According to Sebastian Raedler, Wolf von Rotberg, Andreas Bruckner, and Tom Pearce at Credit Suisse, fund managers have been putting most of their bets on some very specific stocks to help them weather the storm in times of great volatility:
Basically, fund managers are putting most of their equity bets on companies that sell food, beverages, tobacco, and household items — known as consumer staples. The idea is that even if the financial sky falls in, people will still need to eat and drink, smoke, and clean the house. It’s a safe bet.
But fund managers are massively holding back on financial stocks. Financials are much more exposed to ructions in the market and so earnings could suffer as a result of the market turmoil we’ve been seeing.
Credit Suisse analysts say: “Overall, we maintain our cautious stance on European equities” and “we also remain cautious on banks” because those stocks are so volatile right now.
They are not wrong. UK-based banks like the Royal Bank of Scotland, Lloyds, and Barclays have seen the share price drop between 20-30% over the last month.
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