It appears, whether we like it or not, we are going to have to deal with Brexit for quite some time. There are so many unanswered questions about trade and currencies, and short and long term economic impact in Europe and the world. As we are aware, the markets don’t handle uncertainty real well. Traders and European gamblers were sure that the leave vote would not prevail. As we saw in the markets, stocks rallied in Europe and in the U. S. leading up to the vote, which seemed to us a bit brash and cocky. Regardless, the exit vote did prevail and now the world has to try to figure out just what it all means. Needless to say the uncertainty is likely to be priced into markets for the foreseeable future.
As for today, stocks continued Friday’s slide on big volume. By the close, the Dow Jones Industrial Average was down 260 points to finish the day at 17,140. The S&P 500 was down 36 points to close at 2000. Gold was up $6 to trade at $1,329 per ounce, while oil was down $.93 to trade at $46.71 per barrel WTI.
We wouldn’t be surprised to see a bounce in the stock averages at some point this week, but then we’ll be heading into earnings season- which we expect to be challenging as well. The key will be, have we repriced/adjusted enough that a soft earnings season and the unfolding of Brexit is already priced into to these lower levels? As we know, repricing happens fast. In just two trading sessions, we’ve done a lot of “repricing”.
These are the challenges that we find before us as we enter the dog days of summer. Long term, these challenges have always provided opportunities for diligent investors. This will be no different, we just never know exactly how they will play out. Britain leaving the EU is something new. There is no playbook. It may cause heartburn for months or be forgotten by the end of the week. Again, never let these events alter your long term investment game plan. When looking at a long term chart of the stock market, you’ll see dozens if not hundreds of these events. What always continues is the long term slope that moves from lower left to upper right.
Have a nice evening everyone.