US equity market recovered nicely from Brexit to finish the second quarter mostly in the black. Also, markets end first half on similar gains The Dow Jones Industrial Average was up 1.4% while the S&P was up 1.9%.  Small caps were up even more in the quarter with Russell 2000 clocking an impressive 3.4% but the tech laden Nasdaq was off 0.6%.

The ten year Treasury finished near record low yields at 1.49%. Crude oil settled in at $48.33 / barrel and gold ended at $1,318/oz. The dollar bought 103 yen which has soared 14% YTD while the euro cost $1.11 which was also 2.2% higher against the dollar. The UK pound closed at $1.33 down 11% YTD.

For the first half of 2016, the Dow Jones Industrial Average was up 2.9% and the S&P 500 up 2.7%. The Russell 2000 was up 1.4% while the Nasdaq sunk 3.3%. Gold was up 24% and crude oil up even more at 31%.  Through the first half the euro climbed 2.3% and the yen was up 17%.  The UK pound was off almost 10%.

The results indicate the Brexit downdraft last week was not sustainable. The stock markets seem to be saying recession is still a few quarters out.

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After the Conservatives select a new prime minister sometime in September, several financial and structural issues will have be addressed before progress is made on a smooth Brexit.

The financial decisions include phase out of UK’s EU budget contributions and what to to with joint research projects slated to end after Brexit. What are they going to do about British subjects working in EU institutions and what is the status of UK nationals living in EU and EU nationals living in the UK?

Remaining EU leaders will need to set new policy priorities regarding economic growth and security.  Negotiations can’t formally Begin until Britain invokes Article 50, official notification of withdrawal, sometime in the fall.

Markets have stabilized somewhat but it will be at least six months before we get close anything resembling normal.

Initial analysis on Britain’s exit from the EU has been all over the map and has more to do with the personal biases of the prognosticator than substance. I think we need to know who the next prime minister will be (Johnson, May or Gove?) and allow the other leaders time to hammer out positions.

Meanwhile, financial markets will have to simmer while political consensus is reached and corporate leaders can plan and execute under the new contours. The speed of departure is at issue with France demanding a quick and punitive exit while Germany wants to take time and get it right.

The US economy which remains healthy will do OK while waiting as it did through the Greek crisis.  Worries are strengthening dollar, sagging business confidence and tightening financials conditions. Households will enjoy cheaper imports, grander European vacations and lower mortgage rates.

Forecasting politics and economics is difficult even in the best of times. Best to relax and let things play out.

Seems hard to believe Britain actually voted to leave the European Union. It opens up a can of a hundred worms such as myriads of new political and financial accords to be renegotiated, new immigration policies established and opens new internal divisions among the nations of the UK.

Though ground zero was the UK and the plummeting pound, implications around the world were far reaching. Let’s start by examining what happened to global stock markets.

The first wave after the referendum results were in hit Asian markets which are mainly emerging with the exception of Australia, Japan and Hong Kong. Shanghai was down 1.3% (-19% YTD), India -2.2% (+1%), and South Korea -3.0% (-2%) respectively. Meanwhile, Japan swooned -7.9% (-21%), Australia -3.2% (-3%) and Hong Kong -2.9% (-8%).

When European markets opened the carnage continued: UK down -3.2% (-2% YTD), France -8% (-11%), Germany -6.8% (-11%) and Italy -12% (-27%). Apparently the EU markets and economic outlook suffered more than UK. Same story in the US with Dow plunging -3.4% (-0.1% YTD), S&P -3.6% (-3%), and Nasdaq -4.1% (-7%).

Looks like Fed hike is off the table until after the fall elections and the strong dollar caused by cratering currencies (except Japanese yen) will challenge US profits in the near term.  The only certainty to come from Brexit is there will be much more uncertainty.

Its early but UK vote to leave the European Union was unexpected and investors sent global markets into a tailspin.

In my thirty years of investment experience I put this event in the class of the Soviet Union breakup, 9-11, Iraqi war and Greek disturbance. Each event created golden buying opportunities.

Not confident this one follows suit.  Stay tuned right here for my interpretation of developments.  What a time to launch a new blog.

The Federal Open Market Committee (FOMC) of the Federal Reserve met today and held its target federal feds rate unchanged after their initial hike in December. Fed Chairman Janet Yellen’s press conference after the meeting can be be summed in one word: Uncertainty. I feel she is a very articulate individual but the gist of what she said was unhelpful to market participants.

From her answers to reporter’s questions, it was clear the FOMC has no plan going forward to rev things up, sounding more like a subjective process reacting to immediate events such as Brexit, Orlando and weak jobs.  FOMC’s critics, including myself, feel the time has passed to raise rates while the listless economy and overvalued stock market is dangerously drifting toward the rocks with no means to steer it away.

The Fed should have raised rates a year ago even if symbolic when the economy could have handled it and given them a cushion to make adjustments to set-backs. Now the stock market has been distorted, commodity-based emerging markets wallowing and developed trade partners weakened.

Yellen couldn’t explain why the Fed’s forecasts and expected policies have constantly changed over the last three years and what their plan was to fix the lack luster GDP growth after nine years of recovery. Mostly likely the economy has lost confidence in the Fed after their policies or lack of have caused lending to shut down, business not wanting to invest. job seekers not motivated and leaving fixed income retirees in the lurch.

While Yellen said otherwise, I’m afraid the presidential elections are going to come into play and will blunt any further credibility the Fed may have left.