Market Commentary June 24, 2016

Market Commentary June 24, 2016

Good morning.

Because of the Brexit vote yesterday in the UK that resulted in the UK choosing to leave the European Union markets are in a bit of turmoil this morning. The US markets are down this morning, but at this point, they have only retreated back to levels we were at last week.

European stocks are down heavily this morning as illustrated by the chart below.

Global stocks, minus the U.S. stocks, are down as well but only about half of the drop in comparison to Europe as illustrated by the chart below.

My initial thought is that the US markets are overreacting and have become a bit irrational. The UK is about 4% of the global GDP and any disruption there is not going to have a major impact on the global markets. The after effects of this vote are going to take years to play out and the negative impact will be spread out over that time. Ultimately this could be a positive for the UK but we’ll have to wait and see.

This type of overreaction can continue on for several days but the panic usually becomes less and less. Plus, because this is Friday many traders (traders, not investors) will not want to be holding as many stocks going into the weekend because of uncertainty.  I’ll be watching to see what happens over the next few days, but I don’t think this is the beginning of any long term correction. But as usual, I will look at the evidence the markets present and adjust accordingly if needed.

My sense is that this is an opportunity and I will be looking for ways to take advantage of that. The Brexit will create uncertainty and some emotional reactions in the markets and that is where those opportunities come from. So if investors don’t panic, and remain rational, they will emerge from this event in a better position and poised for growth.

Thank you.