Market Update – Brexit Edition

I love waking up to overly sensationalized headlines like this on a Saturday morning:

USA Today headline: "U.S. stocks get absolutely crushed by 'Brexit'"

USA Today headline: “U.S. stocks get absolutely crushed by ‘Brexit'”

Indeed, the somewhat unexpected outcome of the British vote to leave the European Union caused a significant decline in stock prices around the world — the global stock market index (ACWI) was down a significant 5.38% in one day.

And the S&P 500 hasn’t been this low since, well….about a month or so ago; and is still within a breath of the all-time high.



In other words, Friday’s decline fits well within what we consider normal market volatility, and certainly isn’t panic worthy. Nor did it create a great opportunity to buy at significantly reduced prices.

Whether or not this particular geopolitical event (“Brexit”) is the catalyst for a more significant market sell-off is yet to be seen. However, if a further decline does follow, Brexit will simply be the final straw — not the underlying reason.

Britain represents only 4% of the global economy (source: International Monetary Fund, 10/2015), and their departure from the EU will take a number of years to complete. By the time Britain has completed this transition and any impact on the U.S. or global economy is known, “Brexit” will likely be a distant memory — if not all but forgotten in the news cycle.

Now, as an investment manager, I still find all of this fascinating. I stayed up late on Thursday to watch the votes roll in, and monitored the market’s reaction throughout the day Friday. I will confess that the decline in stock prices had me smiling — I am a patient investor and willing to wait for attractive prices to show up. Friday’s decline helped.

Of greater interest to me were the assets that went up significantly on Friday:

  • Core Bonds up 0.52% (AGG)
  • Long U.S. Treasuries up 2.68% (TLT)
  • Gold up 4.96% (GLD)
  • Inflation-Protected Treasuries up 0.63% (TIP)
  • Mining Stocks up 5.91% (GDX)

My core investment principles place a very high priority on managing our clients’ downside risk during periods of market turmoil, and Friday was a good day to ensure that the steps we have taken to preserve and position wealth for long-term growth are working.

Our firm-wide client portfolios had net returns on Friday of -0.23%, and a number of our strategies actually increased in value. While a one-day return is not terribly relevant in the context of our long-term objectives, it is, of course, good to know that Friday’s 5% plus global market decline had virtually no impact, and possibly even a positive impact, on our investments.


The firm-wide composite return is the asset-weighted average of the performance of all client portfolios. Returns are presented net of all fees, including any applicable custody and trading costs, manager fees, fund expenses, and our highest applicable annual advisory fee (currently 1.0%). Results are total return and include the reinvestment of all income. Past performance is not a guarantee of future results.