Darren's Blog

A resource for the thoughts and writings of Darren Brennan

July 2016 Market Commentary by Darren Brennan


Economic Outlook


Almost every year there is a surprise event that roils the markets and the global economy was dealt a serious blow with the news that voters approved Brexit, or Britain’s exit plan from the European Union. While I think the economic effects of Brexit will slow the already weak recovery in Europe, I think this will be good for the U.K. in the long run. I have written over the years about my skepticism that the Euro would be a lasting currency and it appears that the out of control immigration into Britain won over enough voters to begin the dismantling of the European Union. I do think that Brexit is only the beginning as it appears that France and even Germany may want to break free of the European Union and who can blame them? Britons were increasingly upset that they were under the control of unelected officials who controlled everything in the Union from Brussels. It would be the equivalent of asking Americans to turn over control of the U.S. economy and immigration to the United Nations and even Obama isn’t foolish enough to do that. However, it wasn’t above Obama to fly to the U.K. and ask exactly that of the British people a few weeks ago. The good news is that the vote rebuked Obama and the Brexit vote certainly has Hillary Clinton and Obama on the wrong side of history once again.




I do think that the chances of a global recession have increased as a result of Brexit but I do think most of the damage will be limited to the Eurozone. I also think that over the next few months, “Brexit” will be just another surprise that the markets will have dealt with and the markets will then focus on the elections in November. In the meantime, I think that the American economy will still be one of the better economies on the planet, but ours is still barely growing. “Hope and Change” has not created the jobs or the growth that was sold to voters in 2008 and again in 2012.


Elections 2016


The Brexit vote certainly helped Trump since he understood why Britons would vote for it and it appears that frustration over illegal immigration into the U.K. was what put the votes over the top for Brexit. That sounds very similar to what is going on here in the U.S. where you have a lot of frustration about the same issues since we have an unprotected, open border and the weakest economic recovery since WWII. For Hillary, she has been consistently wrong on major issues and Brexit was another example that has left her campaign scrambling for cover. There appears to be a worldwide movement against “globalization” and the Brexit vote may have given that movement a huge boost. And make no mistake about it, in the Presidential race there is one candidate who is a globalist and one who is not. The clear difference between Trump and Clinton in this matter is that Trump is pushing for America first, while Clinton favors big international trade deals that send jobs and money overseas.


Stock/Bond Report


Stock market volatility spiked as news of the Brexit vote hit the wires which sent stock values plunging. However, I think investors realized that there may have been an overreaction to the news and bargain hunters came in and bought into the market. As a result, the markets appeared to have digested the Brexit and will now focus back on the Fed and the elections. I do think that for all of the news and the decline of stocks immediately after Brexit, U.S. stock values should be higher a year from now. It is interesting to note that stock values have largely been unchanged for over a year now as the markets go through this period of uncertainty. Stock markets typically don’t like uncertainty and the Brexit vote combined with the Presidential elections and what the Fed may do should keep the markets without a clear path forward up to the November elections. As a result, I think stock and bond values tread water for the next few months and we should see more volatility as we normally do during the summer months.



If you become concerned about the volatility this year, please contact my office. There are other financial products, such as fixed annuities**, that can reduce volatility in your portfolio without having to put your money in a low-yielding money market or CD. I would be happy to discuss ways we can reduce stock market risk in your portfolio, if that is a strategy you are considering.





Just a Thought




“The way I see it, if you want the rainbow, you gotta put up with the rain.”


-Dolly Parton








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