Brexit

Smart Money Insights: Weekly Brief July 19

A Tenuous Recovery in European Markets Markets have rebounded following the momentous Brexit vote in the U.K. on June 23rd. The S&P 500 and the MSCI EAFE have both rallied over 8% since June 28th. Despite the post-Brexit rebound, the Wall Street Journal has pointed out that investors are fleeing European equity funds. Approximately $9.7BN has been redeemed in the two weeks following the Brexit vote, which marked the 22nd consecutive week of outflows from European equities and approximately $54BN has been redeemed year-to-date according to the Journal. All of this suggests that investors have come to view European economic …

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Smart Money Insights: Weekly Brief July 6

Italy: A New European Crisis Brewing? The fallout from the Brexit referendum has left the British political establishment in disarray, with no clear successor for David Cameron in sight. Businesses are postponing investment and some are weighing a relocation to the Continent. Meanwhile, all is not well for Britain’s neighbors to the south; leaders in Brussels are struggling to find a coherent strategy for dealing with the migrant crisis as prosperous Core countries goad struggling peripheral countries to share more of the burden for housing the migrants. More alarming, however, is the nascent banking crisis emerging in Italy. The Wall …

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Smart Money Insights: Weekly Brief June 29

Brexit Fallout: Financial The financial market’s response to the Brexit decision was swift and dramatic—and the aftermath continues. In the first two days following the referendum, the Stoxx 600 index fell nearly -11% while the S&P 500 declined -5.3%. The pound sterling lost -11.1% against the U.S. dollar and -14.6% against the Japanese yen. Meanwhile, traditional haven assets such as gold and the 10Yr Treasury rallied 5.4% and 1.9% respectively. Two days following the referendum, Fitch and S&P cut the U.K.’s credit rating to AA while Moody’s lowered the U.K.’s credit rating outlook to negative. Bond investor Bill Gross anticipates …

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Smart Money Insights: Weekly Brief June 20

The Collapse of Visium At its peak, Visium Asset Management oversaw $8BN across five hedge funds and a mutual fund focused largely on the health care sector. The firm recently announced that it is liquidating four of its funds and selling another to AllianceBernstein. The liquidations followed the arrest of a high-profile portfolio manager at Visium for insider trading. Visium’s flagship Balanced Fund was down approximately -9.3% YTD through May and the firm has been hit with a wave of redemptions following the disclosure of the insider trading investigation. Meanwhile, investors will need to wait several months for their capital …

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The Rise of Populism and the Fall of Economies

Recent election cycles in the U.S. and Europe have seen the ascendance of political parties whose platforms are significantly shaped by populist initiatives. Underlining many such initiatives is a preoccupation with immigration. Earlier today the Wall Street Journal reported that 40% of Brexit supporters indicated that immigration was their primary reason for backing the Leave campaign. Although the U.K. is not party to the Schengen agreement, which enables passport-free travel across member states, eurosceptics have found a strong source of support among those fearful of spillover from the ongoing migrant crisis. In the U.S., wage stagnation and a preoccupation with …

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Smart Money Insights: Weekly Brief June 14

10 Days Until Brexit? In an earlier post, we explored the potential fallout of a Brexit and the shifting fortunes of the Leave camp. A new poll gives Leave a 19 point advantage (52% vs 33%), while UK bookmakers are pricing in a somewhat lower chance of Brexit—approximately 40%. Bookmakers are continuously revising upwards their estimates of a Brexit and bookmaker William Hill indicated in an interview with Business Insider that Leave could overtake Remain in betting by the weekend. Meanwhile, a new report from Morgan Stanley forecasts a -15% drop in European equities and a -7.8% drop in the …

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Brexit in 10 Days?

A new poll from the Bruges Group gives the Leave camp a 19 point lead over Remain. According to the poll, 52% of respondents supported a Brexit, while only 33% wished to remain in the EU and 15% were undecided. A decisive victory for Leave is within grasp; even if all of the undecided Britons voted to Remain (an unlikely outcome), Leave would still come out ahead. Adding to the confusion, UK bookmakers are pricing in a substantially lower risk of a Brexit; for instance, bookmakers Ladbrokes and Coral are pricing in a 36% chance of a Brexit. Given the …

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Smart Money Insights: Weekly Brief June 7

Pay to Lend Fitch Ratings recently highlighted that global negative yielding sovereign debt topped $10.4 trillion in May, an increase of $500 million from the prior month. Much of the increase was driven by yield declines in additional maturities of Japanese and Italian sovereign bonds. In Japan, quantitative easing and negative interest rates instituted by the Bank of Japan have contributed to negative sovereign yields. In Europe, weak inflation and manufacturing data along with an expansion of the ECB’s economic stimulus program have contributed to the negative yields. 17 Days until Brexit? Last week, we explored possible explanations for a …

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Brexit in 22 Days?

A new Guardian poll reveals a 52 – 48 split among Britons in favor of leaving the EU. The alarming result represents a sharp decline in support for the Remain camp, which held a comfortable ten point lead as recently as mid-May. Commentators attribute Remain’s reversal of fortune to a combination of heated rhetoric surrounding the migrant crisis and a growing skepticism among Britons that a Brexit would negatively impact their personal finances. A recent survey by UK research group Ipsos Mori revealed that 58% percent of respondents believed their standard of living would be unaffected, while a further 9% …

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Smart Money Insights: Weekly Brief May 24

It’s time to revisit some of the big macro risks over the past year.  The risks of $10 oil, a recession in 2016, a sudden devaluation by China, Brexit and a renewed Grexit crisis all appear contained – see below.  If we’d polled readers in January about where the equity markets would be by Memorial Day if those five risks had all subsided in the second quarter, the answer most likely would not have been “flat to down YTD.”  But here we are.  Perhaps the markets are shifting to concerns about more rapid Fed rate hikes or the rise of …

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