The Impact of Brexit?
By Justin Bolmgren
Needed Direction. Most expect the weakness to continue, at least in the coming days, as obvious financial ripples will flow from this momentous event. But despite the glum mood in the market, analysts are urging calm as the Brexit-sparked instability is expected to recede in time and as organization and direction appear. Remember, the markets hate uncertainty. Direction regarding trade deals, passporting, financial regulation (or deregulation), and liquidity will abate some of the fears.
Effect on U.S. Economy. The U.S. economy will continue growing slowly. Brexit is not expected to have a meaningful impact on U.S. financial markets and economy or push us into recession. If nothing else, Friday’s global bloodbath is likely to push central banks to maintain accommodating policies to boost liquidity. More important, it will dissuade the Federal Reserve from tightening monetary policy (raising interest rates) until the markets have regained their equilibrium, according to economists.
Your Portfolio. At Bolmgren RetirePLAN, we were cautiously optimistic leading up the Brexit vote on Friday. We maintained a fair weighting of high quality stocks in case a "Remain" vote was confirmed and markets ran positive. We showed caution though by raising substantial cash positions in case the there was a "Leave" vote and markets reacted negatively - as they did. We expect continued market volatility for a short period of time and will be looking for an opportunity to invest that cash near market lows.