Thoughts on brexit and markets
If you want to know what happened last week on why most were on the wrong side of the vote, we think the following quote may just be appropo!
“There is no such thing as public opinion. There is only published opinion.” – Winston Churchill
The following would be our normal report based on normal market occurrences based on what we saw last week:
Before Friday, markets were already less than meets the eye considering the Dow and S&P were a stone’s throw away from their yearly highs.
Retail has been trashed. Travel-related has been trashed. Biotech has been trashed. Financials cannot get out of the starting blocks. Asset managers remain weak. Autos and auto parts yuck. Apparel smoked. Airlines at yearly lows. Most foreign markets terrible. Emerging markets gross. New highs vs new lows not keeping up…not nearly enough. Small caps continue to underperform badly. We simply should not be able to say all this in a very strong market.
And then there was Friday. The outcome:
Everything (except gold,silver,utilities and some defensive names) has topped. The worse got worser and the best came down hard…
The DOW sliced through 14 weeks of range.
The S&P did the same.
The TRANSPORTS broke 4 months support.
The FINANCIALS topped and broke 2 month support.
The NASDAQ rolled over badly…ditto the NDX.
The EAFE index crumbled and we mean crumbled.
Asia and Europe went splat. They were already weak.
Big top in INDUSTRIALS.
Big top in TECHNOLOGY.
The SOX goes from new highs to giving back all its recent gains in a day.
We can go on but you get the point. In a normal world, a major top has been put in place…BUT:
That all said, there is absolutely nothing normal about the outside influences in the market. Keep in mind, what you are seeing in Britain is the outcome of distant, unaccountable bureaucrats dictating to others how they should be, what they should do and how they should act. We expect the news to be fluid. Article 50 is a treaty where anyone who wanted to leave the EU has 2 years of negotiating and also needs the rest of the nations to vote yes…so more uncertainty lies ahead. We expect the people in power to say stupid things and more than likely do stupid things. Didn’t you know everyone who voted to leave was racist and xenophobic? Remember this is all about people wanting power. This is all about people wielding that power.
We expect the maniacs in government and central banks to take more crazy action if markets continue to swoon. We do not know how much or in what form but unfortunately they stand at the ready. Just remember what we’ve been telling you. Central bankers have one goal in mind and that’s to prevent markets from going down. They have interfered in every way, shape and form and expect that to continue. Whether or not that turns the tide is another story. Stay tuned.
The positives are that we are entering end of quarter as well as a holiday while a big dose of bearishness has picked up…but that may not matter right now.
So what’s next?
Central banks are here to help all of us, right? If we don’t help out the CEO’s with their stock option sales, let the rich get richer, that would be bad for all of us. Then they won’t hire, right? Doesn’t sound like a free market. Markets and the economy – two different things these days.