The surprising decision by the U.K. to leave the EU has ramped up volatility. Bob Doll, CFA, explains how the event may also create opportunities.
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Friday, June 24, 2016
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Brexit: What it Means for Investors
Bob Doll: Hello this is Bob Doll with a quick market commentary in light of the Brexit vote. The so called Brexit vote, the disappearance of the Brits from the EU, has passed, surprising almost everyone. It will take two years for this to happen and some of the reforms will actually take as many as ten years. So the big problem here is the uncertainty that exists. Near term, its created a risk-off environment for the markets, bonds beating stocks defensive stock beating cyclical stocks, and sovereign bonds beating credit bonds. Uncertainty increases, the UK will probably be subject to recessionary forces here in the near future, and some of that will spill over to the EU.
The Bank of England and the ECB will likely ease some more. At the end of the day, this is a vote against free trade narrowly and more against globalization generally, and therefore weakens global GDP. And also put more pressure on the EU structure and the cohesion within it. The British Pound has taken the biggest hit, with secondary weakness in the Euro. Strength on the other hand in the Swiss Franc, the Japanese Yen, and the US Dollar. More broadly, this British vote is a step away from free trade, as mentioned, but when you add on to it the terrorism that has invaded the world over the last few years, its moving the world towards more nationalism, populism, and hopefully not, but potentially protectionism. While this is not a day that will promote growth, the world will hang together and move forward, but this is an important bump in the road.
Given the severe weakness, we would use severe weakness to add to risk positions, including equities, and this points out one more time the relative strength of the US versus the rest of the world. Thanks.
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Risks and Other Important Considerations
The statements contained herein represent the views and opinions of Nuveen Asset Management, LLC. as of the date of production/writing and may change without notice at any time based on market and/or other conditions and may not come to pass. This material is for informational and educational purposes only and is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and should not be considered specific legal, investment or tax advice. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. All investments carry a certain degree of risk, including possible loss of principal, and there is no assurance that an investment will provide positive performance over any period of time.
Prices of equity securities may decline significantly over short or extended periods of time. Debt or fixed income securities are subject to market risk, credit risk, and interest rate risk, call risk, tax risk, political and economic risk and income risk. Interest rate risk, as interest rates rise, bond prices fall. Below investment grade or high yield debt securities are subject to liquidity risk and heightened credit risk. Non-U.S. investments involve risks such as currency fluctuation, political and economic instability, lack of liquidity and differing legal and accounting standards. These risks are magnified in emerging markets.
Video was filmed on June 24, 2016
Featured Speaker: Bob Doll, Senior Portfolio Manager and Chief Equity Strategist, Nuveen Asset Management, LLC.
Nuveen Asset Management, LLC. is a registered investment adviser and affiliate of Nuveen Investments, Inc.
17109-INV-O-06/17
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