I think we are in for quite a few days of volatility for sure but I do not think this is like Lehman Brothers collapse which was a big catalyst to the downside for the bear market in 2008. This is different. Imagine in 2008 what would have happened without the Lehman Bankruptcy. These are catalysts.
The Brexit Leave vote, I don’t think is the same type of event. This to me is an unraveling of the EU and it is not something that like the credit crisis can be fixed because in the end, there is nothing to actually fix. Instead the EU has to make changes or it will become obsolete at some point. However the underlying EU member countries will continue.
There are a lot of ramifications that will come out of this leave vote. I think we will find that Scotland and Ireland will stay in the EU which could at some point push those countries to become independent of the UK completely. Who knows, in the end maybe the EU bureaucrats will finally understand you have to be elected not hand-picked.
Europe has always been at loggerheads with one another. After traveling throughout Europe many times, it is amazing how diverse the cultures are. They are not one big country and it is tough to say how they will ever see “eye-to-eye”, but I do think you have to have elections for EU officials.
We have a huge advantage over Europe here in North America both from an industrial and cultural perspective in my opinion. Yes America is diverse but if you ask the majority, they are American first and foremost just as in Canada we are Canadian first and foremost. Over the years of visiting Europe I have found people are German first or French first, Italian, Spanish, Portuguese etc., first. They don’t look at themselves as European first and German or French etc second. I also think immigration and security has become an issue due to the terrorists.
Our markets are going to sell-off, I think bigger than the futures show this morning (Friday Jun 24 2016), but they will stabilize and then we go into earnings. I think the upside remains limited but the downside unless there is a recession, is also limited.
In my opinion I think Friday (Jun 24 2016) will be bad, Monday stocks should rally and Tuesday could be bad. By the end of next week I think we will be lower but not 1900 or 1800. I think somewhere between 1950 and 2025 to 2050. Just my opinion but I base it on how this event is in relation to events like the Sept 11 attacks, dot.com bubble, Lehman Collapse, Worldcom, Enron, oil embargo, black Friday, Russian currency crisis, etc. Some have been big crisis and others small ones. In the long run, I think if the next quarterly earnings are lower on average, stocks will move lower into the summer’s end.
If economically things begin to unravel in Europe and recessions are apparent, then stocks will reflect that by moving lower as we saw earlier this year (2016) with China’s slow-down.
These types of events such as the “leave” vote have proven throughout history to have been excellent buying opportunities. This is why I keep 30% cash on the sidelines, for events just like this. Despite being older I still look at investing as a business. This is my “small-business” and I treat it like a business and these types of events have proven themselves to be opportunities to grow my business.
My Best Always,