The markets made a surprising move higher this past quarter, in the face of what most thought would be bad news for the global economies: Great Britain leaving the European Union (aka Brexit). In reality, investors have been comforted by the fact that the FED has decided to leave interests rates low in an effort to inject plenty of liquidity into our slow growth economy. There are several global themes we are now monitoring for the remainder of the year:
In all, we like the way the markets are reacting, in the face of some challenging global economic news. We made a big jump just after the UK vote and that move took us out of a two-year range. This is very positive technical action. It wouldn’t surprise us to see the markets go through a short-term correction. But, we believe we will see another market push higher before year-end.
The markets have rallied strongly since the Brexit vote was finalized, a move that was counterintuitive to most investors. In reality, markets typically rally when investors do not expect it and bear markets appear when everyone is apathetic. So, it wasn’t surprising to see the markets rally in the face of this year’s volatility.
There are a couple things we feel are driving this rally:
The markets look a bit tired in the short-term, as they have rallied strongly over the past couple months. We wouldn’t be surprised to see investors take a short-term break. However, we feel that any pullback in this time frame would lead to higher prices down the road. We are currently analyzing markets and sectors to discern where we might deploy more capital.