Market Update #3 – June 24, 2016

I wanted to pass along some thought-provoking comments from Dr. David Kelly, Chief Global Strategist of JP Morgan.  Dr. Kelly held a conference call earlier today and bulleted below are some of the more substantive take-aways re: Brexit in a stream-of-consciousness format (since some were from prepared remarks and others from Q&A):

• Brexit is a negative for the UK economy: “no island is actually an island.” They still have to trade with the EU & the disgruntlement on both sides will make for tense negotiations going forward;

• The EU won’t make a sweetheart deal with Brits so as to not encourage others to leave;

• For global investors: this is a big problem but for a small country: UK is only 4% of global GDP, but it won’t fall off the globe – it should slowdown but it’s not going completely away;

• EU and Eurozone are different, not a Euro currency problem directly, as the Brits never adopted the common currency -they always maintained the Pound Sterling as their home currency;

• If they had to launch their own currency it would’ve been major problem….(Greece would had to leave and make their own currency had the Grexit referendum gone in their favor);

• Domino effect is possible – could help populist parties around the world – this is negative for global investors as it relates to clarity on the path of global growth;

• In the US: the Fed didn’t like the Brexit outcome, they’ll be less willing to raise rates now even with good employment #;

• In the US: inflation picking up, profits should improve;

• Did anything happen overnight to reduce the value of American companies by 3%+? NO.

• Markets always react irrationally;

• Brexit doesn’t change JP Morgan’s outlook for the Eurozone – they don’t see it causing a recession, just a little hit;

• Ireland will be particularly effected;

• Doesn’t significantly raise risks of Europe or Global recession;

• Effect of strong USD: short term move in $ but Fed is paying attention and will be dovish/back off if it feels it is necessary;

• Already factored in slow growth and strong $ for us company valuations;

• Last year $ was up 16% which hurt S&P earnings by 6%…$ is down from Sept. 2015 and if it stays around its current level the headwind will not exist;

• Dollar is not strengthening a lot against anything but GBP.

We’ll be in touch after the market closes and over the weekend as the fallout from last night’s Brexit vote continues to be assessed.  dc

Important Disclosures:

The views expressed herein are those of Douglas Ciocca on June 24, 2016 and are subject to change at any time based on market or other conditions, as are statements of financial market trends, which are based on current market conditions. This information is provided as a service to clients and friends of Kavar Capital Partners, LLC solely for their own use and information. The information provided is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as, investment, legal or tax advice. Past performance does not ensure future results. Kavar Capital Partners, LLC makes no warranties with regard to the information or results obtained by its use and disclaims any liability arising out of your use of, or reliance on, the information. The information is subject to change and, although based on information that Kavar Capital Partners, LLC considers reliable, it is not guaranteed as to accuracy or completeness. This information may become outdated and we are not obligated to update any information or opinions contained herein. Articles may not necessarily reflect the investment position or the strategies of our firm.