Thoughts {06.29.16}

Well we're seeing that snapback rally I thought could occur when I last posted.  The S&P 500* rallied hard yesterday and wiped out all of Monday's decline.  As I'm writing this today, the index is up an additional 1%.  Also as of this writing, the index is only now lower by about a half percent from where it was on June 17, 2016.  The reason I use that date is that's where stocks traded before you saw a rather large move to the upside on position of an expected "remain" vote in Great Britain.
I think you need to take the week prior to the vote and the early days after its results off the table when trying to figure out where we should be trading.  The whole Brexit reaction is almost similar to throwing a large rock into a still pool.  There is a reaction as liquid fills the void left from the displacement by the stone when it hits the water, then counter reaction of the waves off of the displacement.  Eventually though things settle down.

And why are things settling down?  Because at the end of the day life goes on.  Companies selling olives from Greece into Britain, oranges from Spain and sinks from Germany are still selling those products into Great Britain today.  At some point doing that sort of business may be more difficult but I'm betting that business people will figure out how to get it done.  Money knows no boundaries and where there's a will to do business there's a way to bring it about.  There's going to be months of jockeying for position overseas and now more business uncertainty but these economies are too interconnected to simply ignore each other.

It also wouldn't surprise me if Britain either doesn't leave the EU or leaves it in name only.  A work around in my view would be for Scotland and perhaps Northern Ireland to stay in the Eurozone while England and Wales leaves.

Now as to the markets, some profit taking may occur soon but probability suggests that stocks will now hold up into the end of the quarter tomorrow.  The investment management community has an invested interest in making those end of quarter and end of half-year numbers look as good as possible.  Those numbers in any event are only going to look mediocre at best.  Major indices around the world are slightly lower to basically break-even through the end of June.

Back tomorrow.

*Long ETFs related to the S&P 500 in client and personal accounts.  Please note that positions can change at any time and without notice on this blog.