Good day,

A surprise “leave” vote by the British sent markets in both directions. While it’s no 2008, most equity markets are showing declines this morning with those in Europe most pronounced. The British Pound has taken a hit while the US dollar has climbed against all currencies except for the Japanese Yen. Safe haven assets including gold, utilities and some consumer staples have moved higher on the news.

While this historic move will undoubtedly have consequences for Europe, market selloffs have more to do with knee jerk reactions due to fears of the unknown. The ironic thing here is that the UK itself will likely suffer the most. The UK economy has been soft for some time and over the last year this has been exasperated as many businesses were reluctant to invest in the UK given the uncertainty of Brexit. Some economist believe the UK is likely to face recession in the short term and while time will tell, we investors need to focus on what such a move means to our own investment accounts.

At the end of the day Brexit is simply a choice for a country to have less involvement with a group of others. Remember that the UK has always been a little “removed” from the rest of the EU. Unlike the others it maintains its own currency, it requires travelers to present a passport when crossing its borders, and it had originally negotiated a unique arrangement with the EU to receive certain exemptions. The formal removal from the EU will take a number of years and while immigration and trade policies may be amended, the world will move on.

An advisor in our firm said it best: “companies still opened this morning around the world— McDonald’s will still sell Big Macs and Starbucks $6 lattes, and they will make money”. As I type this the S&P500 is around the same level it was last Thursday, so not much has changed on the week.

Over the upcoming days/weeks, the media will switch its attention to something else, more likely the US presidential election. Investors will forget all about Brexit and be consumed once again by the timing of the Fed’s projected interest rate hikes.

Despite my comments, we will look to add to oversold stocks over the upcoming days/weeks. Our likely picks will be discounted energy and financials, both in Canada and the US.

Have a great week,



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