Thoughts on BREXIT

I’ve been chewing on this BREXIT issue for some time leading up to yesterday. I am a bit groggy as I type this because I stayed up well into the night listening to what other people think about it as well. For the sake of brevity, here’s how I’m processing this as of lunchtime 6/24/16:

1. The markets have dropped precipitously today. The Dow is down 513 as I type but that is actually up more than 200 points from where the futures markets on stocks were trading when I fell asleep early this morning. That is a positive sign of underlying stability in my perspective.

2. They are back down to where they were last week, last month, in April, in March and in January. In other words, markets remain in a range they’ve been in many many times this year already.

3. Britain voted to drop out of the EU club it had been a member of for many years. It did not drop off the planet. Therefore, the worldwide drop in the value of companies seems to be fear-based, and not reflective of actual change in value.

4. This is not likely to be the end of this discussion as other EU members who were caught off guard by the “Leave” success, may begin testing waters as well. This will remain a subject of concern/debate for some time.

5. Prior to this vote, prices of stocks were not classically “high” relative to earnings. To use a broad brush, they were “fairly priced” in aggregate in our opinion. Therefore, if things decline from here, we would deem world markets relatively “cheap” and would look for opportunities to rebalance into them.

6. Given the general run up in world markets over the last week, the declines of today (if it ended right now) would be unlikely to pull portfolios out of balance with investment policy statements. That said, we are reviewing portfolios as you would expect and will reallocate as appropriate.

Unfortunately, or fortunately depending on your perspective, no one knows where this is headed because it is a very new/fresh/scary/exhilarating experience. Therefore, please understand that we, like the rest of the world, are learning as we go.

If you have any questions or concerns, please know that we would love to speak with you or meet with you as appropriate. In the meantime, have a great weekend.

Todd H. Brand
President & CEO of Brand Asset Management Group