I wanted to take a moment to comment on the Brexit leave vote and its effect upon world markets today. Part of the movement we’ve seen in the markets is due to the surprise nature of the vote. Polls had predicted British voters would opt to remain a part of the EU. That drove gains in the stock market yesterday that are largely being reversed today. The rest of the drop we’ve seen today can generally be linked to the uncertainty regarding how British decoupling from the EU will effect various corporations, as well as entire economic sectors. There are questions regarding how difficult the EU will make the exit in order to deter other countries from making the same move. UK companies will continue to trade with mainland counterparts as they have been doing since ancient times. There will need to be adjustments in how economic activity is conducted though. Times of change are always unsettling and markets generally do not respond well to change. We expect to see the broad market regain ground as a path forward for affected companies is determined.
While volatility in the markets is often unsettling to watch, it does provide opportunities for account growth. For example, we expect managed futures and fixed income positions to gain ground in the next few days, oil and gas sector assets to remain largely unaffected, and stock based assets to decline less than the broad market. Please do expect some short-term volatility within your accounts. We will be making adjustments to accounts if appropriate in order to capture price change opportunities if they fit with your overall financial profile and risk tolerance.
While the broad market has ended the day well in the red, that is not an indicator of long-term problems within the U.S. markets or economy. The current unemployment rate is 4.7%.1 This figure needs to be put into the context of the people it does and does not capture as the official definition of “unemployed” does not necessarily match the common definition. However, the current figure is seen to more accurately portray the current employment situation than it did during the recession and immediate aftermath. I would note that the average unemployment figure since 1950 is a much higher 6%.2 The bottom line is that volatility creates opportunities and we do not see today’s drop materially affecting what you can expect from your accounts over the long-term.
The information contained in this newsletter is for general use, and while we believe all information to be reliable and accurate, it is important to remember individual situations may be entirely different. The information provided is not written or intended as tax or legal advice and may not be relied upon for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a solicitation of the purchase or sale of any securities.