Thoughts {06.20.16}

Risk on today!

This is going to be short as I unexpectedly have to be out today.  Markets are ripping higher this morning as polls are showing the odds swinging into the British voting to remain in the European Union.  I think it's likely that the vote swung in the "Remain"camp's favor after the murder of MP Jo Cox last week by an allegedly  deranged constituent.  Of course on a short-term basis markets were oversold enough to rally and that has to have helped as well.  

Markets will wake up Wednesday morning to whatever the results are from Europe and then do what they always do; that is to say they will look forward to the next event or data point.  This week Federal Reserve Chairman Janet Yellen is scheduled to give testimony before Congress, a twice a year event known as Humphrey-Hawkins.  It is unlikely that anything new is going to be telegraphed by her this week   If that is the case then there is a higher probability that markets will remain flattish or move a bit higher into the end of the month which is also the end of the 2nd quarter.  Managers will want to make those mid-year performance numbers look as good as possible.   

The period around the 4th of July holiday tends to be quiet in the markets.  In most years stocks sort of seem to sleepily drift higher in the summer doldrums.  Often though mid-summer marks plateau of sorts for the markets.  Mid-July to Mid-October has traditionally been a weaker period for stocks for all the reasons we've outlined in the past.

Beyond the 4th of July holiday I think markets start looking towards the political conventions. The Republicans are going to hold their donnybrook in Cleveland July 18-21 and the Democrats are going to convene in Philadelphia, July 25-28.    All indications say the Republican get-together promises to have the most fireworks.  The Democratic confab looks more like it will be a coronation.  

I will be out tomorrow but will post Wednesday.