We experienced a very quiet, low-volatility market for the first two months and 3 weeks of the 2nd quarter. Then the Brexit happened!
For most of the quarter, equity investors continued the trend of climbing the wall of worry. The quarter saw concerns over the job market (only 38,000 jobs created in May), no growth in corporate earnings (for the 4th consecutive quarter), uncertainty over future Federal Reserve rate hikes, and anticipation of the British referendum over whether to stay in the European Union. But in the midst of all these concerns equity markets slowly climbed higher. It was not until June 24, when the surprise result came out of Britain to leave the EU, that the markets received a jolt of volatility. Continue reading
In a historic vote, the people of the United Kingdom (UK) have voted to leave the European Union (EU), and markets around the globe are moving wildly today. The British Exit or “Brexit” from the EU has several implications long and short term, but first it is important to understand what happened and why. The vote is a culmination of anxiety from the British people about relinquishing control of their laws to the EU, which is based in Brussels. The UK had very little control over policy in general, but immigration and trade were two of the main sticking points. While immigration has boiled over of late, with the mass influx of people from the Middle East, it has roots further back to 2004 when several of the former Soviet Union satellite countries joined the EU and many of their people immigrated to the UK. The EU allowed for refugees to immediately claim unemployment benefits with no requirement for living in the host country for any period of time. This cultural issue now created an economic problem for the UK. Continue reading