Is That All There Is?

The knee-jerk reaction to the Brexit vote is over, but the extent of the fallout is still unknown.

 
 

After a two-day rally, the Dow is down only 300 points from the pre-Brexit level. Dow futures are up 25 points in pre-opening trading. Futures were 75 points higher earlier in the morning, but prices have been fading as the European stock rally appears to be running out of steam. Bond prices were lower earlier but are now higher as some month-end bond index fund buyers are adding to match their indexes.

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The fact is the fallout from Brexit is not over. The only thing that is over is the knee-jerk reaction to the shock of the vote outcome and dumping of bad position bets speculative traders made on the vote.

The extent of the fallout is the great unknown and something that will play out over several months if not years. The fallout might not be noticeable, or it could be a dire as some experts still believe and include the ultimate disintegration of the European Union.

Traders can’t wait around to see how that plays out, but investors could stand aside for an extended period. This leaves the stock market in the hands of traders.

Read more about the bond market, a bond deal for Oracle, and the second quarter's big winner.

Dwight Johnston is the chief economist of the California and Nevada Credit Union Leagues and president of Dwight Johnston Economics. He is the author of a popular commentary site and is a frequent speaker at credit union board planning sessions and industry conferences.

 
 

June 30, 2016


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