I hope you had a great weekend! This will be an interesting week for the markets as a result of the Brexit vote.
LRPC’s Monday Morning Minute for this week, “Brexit Shock — What’s Next” (presented below) comes to you courtesy of Schwab. As an independent, objective Registered Investment Advisory (RIA) firm, Lawton Retirement Plan Consultants, LLC has access to research from many sources. Be assured that I will share the most relevant information with you each week. If you are short on time, try to skim each section heading.
On Thursday of last week U.S. equity markets were up strongly, based on the perception that the citizens of the United Kingdom (U.K.) would vote to remain in the European Union (EU). When the votes were tallied, heavy voter turnout (72% of eligible voters) unexpectedly resulted in a mandate to exit the EU. The markets were shocked with the Dow plummeting more than 600 points on Friday. What’s next? Read what the experts from Schwab have to say below.
Have a wonderful week!
Brexit Shock — What’s Next
By Liz Ann Sonders, Brad Sorensen, Jeffrey Kleintop, Charles Schwab
- Britain shocked the financial community by voting to leave the European Union (EU). Global equity markets plunged as traders searched for perceived safety in the midst of uncertainty. Short-term traders should be prepared for more downside, and the risk of a global recession has risen.
- The U.S. economy is fairly healthy and should manage to stay out of recession territory in the near term, although risks have risen. Long-term investors should stay patient and disciplined.
- The Federal Reserve seems highly unlikely to raise rates in foreseeable future and further economic stimulus cannot be ruled out. Across the pond, the Bank of England has made 250 billion pounds of liquidity available, with more action possible.
Britain voted to leave the EU on June 23, referred to as “Brexit.” We would term this development a market and economic shock. International developed and emerging market (EM) stocks were up through yesterday in June, and over the 90 days leading up to the referendum, suggesting they were not pricing in a Brexit outcome. The initial shock of the unexpected outcome prompted a sharp decline in stock markets around the world and we believe it may take some time for the shock to fully work through the economic, financial, and political systems in the United Kingdom and Europe. With no visible catalyst to halt the slide, the decline in global stocks may continue, as the risk of a global recession increases. [Read more…]