I was having an exceptional year up until Brexit in late June. The action of the financial markets and the headlines (especially the polling #s) for the month prior to the vote seemed disconnected and random. The week of our stock market was trading well, leading me to believe our equities weren’t concerned with what was occurring across the pond.
When a surprising yes vote unfolded the global stock market went into a totally serious temper tantrum, then leading me to believe this event was the catalyst for the next correction. Two days later the market reversed powerfully and confidently has not looked back since.
I am not an economist (but do play one in my mind sometimes) so I left the Brexit analysis up to others. The overwhelming conclusion seemed that the pound would be pounded and the clueless Brits were doomed to a swift, deep recession taking their equity market down. The initial market reaction sure seemed to confirm this. Since that Monday afternoon June 27th the FTSE 100 has climbed 22%, easily the best performing market in the world.
The move off those lows has been impressive with a series of constructive breakouts, which includes today’s 1½% move. The daily chart below left depicts this bullish move. What excites the Bulls even more, is the stones throw (not Stonehenge stones) the index is from an all time high and a long term breakout (monthly below right). This picture is not typical of a prelude to a correction or recession. I guess there is something to be said for self determination.
Remember many domestic indices/sectors (especially all the tech guys) broke to new highs in July/August also supporting the Bulls half of the ledger. Hard to see a deep correction developing from these pictures, but maybe Deutsche Bank et al. will reveal another round of group executive think hubris that threatens to fracture the globes banking structure?
I still remember 2008,