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Jun 24 2016

UK Exits European Union

Markets were roiled overnight and Friday morning, after Briton’s voted to exit the Eurozone. Globally equity markets fell and safe haven assets such as Treasuries rallied – If U.S. markets close where they open today, they will have lost about 1 ½% for the week and end where they started in April of this year. In other words, another no “real” action quarter. Although Central Bankers will do their best to reassure markets, the impact of the Brexit vote on the world’s economies will take 6 to 12 months to be felt. As such, investors should expect dovish monetary policy, i.e. no rate hikes this year, lower growth forecasts and a generally conservative attitude towards cap-ex spending should also be expected. However, this will likely prove to be a temporary environment, as the ultimate economic impact of the vote will likely be much more subdued than most fear.

 

Looking Ahead:

The Brexit hangover will come on Monday, after market participants will have had the opportunity to digest the information and think through the repercussions of the British vote. And while there will likely be increased short-term market volatility, the fundamentals for most businesses have not changed dramatically. The proprietary GGFS Montebello Process® is designed to address the various needs of investors through the careful segmentation of assets and diversification of portfolio strategies with a strong focus on lower-risk / lower-volatility investments. Furthermore, as a result of the fears associated with the Brexit vote, we anticipate high-quality dividend paying stocks to gain more favor amongst investors who are not willing to settle for 1%’ish returns from high-grade bonds.

 

Next Week’s Market Moving Events:

 

Monday: Brexit hangover, U.S. International Trade, PMI Services, Dallas Fed Manufacturing data

Tuesday: U.S. GDP (Q1), Corporate Profits, Case Shiller Home Prices, Consumer Confidence, Richmond Fed Manufacturing Survey

Wednesday: Personal Income and Spending, Pending Home Sales, Janet Yellen Speaks, Farm Prices

Thursday: Lots of International Data

Friday: PMI & ISM Manufacturing, Construction Spending