Global stock markets and London Bookies had predicted a remain vote in the days leading up to the UK’s referendum on remaining in the European Union. As the results came in, late into the evening, New York time, the Brexit vote gained traction and won. As Australian and Asian markets opened, they began to trade sharply lower on the surprise news. This then spilled over into European markets as they opened and US futures. So, now what?
- Today will be a tough day as the cash market opens for US Stocks. However, we view this as a ridiculous overreaction by stock and other risky asset markets. Fundamentally, nothing in the global or domestic economy has changed. Growth, albeit at subpar levels continues along with employment growth. Global central banks continue with easy monetary policy and stand ready to provide liquidity as needed.
- All breakups are messy. Prime Minister David Cameron has already announced he will step down and there will be a process to unwind the UK from its European Union agreements and negotiate new ones. What some have forgotten is that the UK still uses the Pound Sterling as its currency and not the Euro common currency.
- In the end this could be much better for the UK and Europe as a whole, as the EU’s structure is an impediment to growth and we all could use more growth.
- This initial reaction of panic will subside and cooler heads will prevail. We remain buyers of stock on weakness, in portfolios that are below their long term equity target.
About Caldwell Trust Company
Caldwell Trust Company is an independent trust company with offices in Venice and Sarasota, Florida. Established in 1993, the firm currently manages over $800 million in assets for clients throughout the United States. The company offers a full range of fiduciary services to individuals, including services as trustee, custodian, investment adviser, financial manager and personal representative. Additionally, Caldwell manages 401(k) and 403(b) qualified retirement plans for employers.
