The quarter ended with a bang, as the UK voted to leave the EU. Markets were especially volatile the last seven trading days of June. In the US, the Dow Jones Industrial Average lost over 800 points in the two days following the Brexit vote and then gained almost all of that back by the end of the month. Neither the initial losses nor the rebound were terribly surprising, although the speed of the recovery was unexpected. One thing that you can likely expect as Europe and the UK sort out this situation, both politically and economically over the next couple years, is equity market volatility.
During the second quarter, equity markets were mixed. The US and Japan were up modestly, while Europe and China were both down. Bonds, real estate and commodities did quite well during the quarter. Much of the gain in bonds was due to falling US yields at the end of June due again to the Brexit vote. For the twelve month period ended June 30th, everything but investment grade bonds and real estate performed lackluster at best. Europe, China and Japan were down significantly for the year ended June 30th. Commodities also were down for the twelve month period.
As mentioned, the situation in the UK and Europe is very fluid and likely to take many twists and turns over the next few months and/or years. The capital markets have never experienced a situation like this before and that makes investors anxious. Anxious investors sometimes make rash decisions. We would advise our clients to remain calm. The situation while fluid is not likely to have a major impact on the global economy except in the UK.
Disclosures: This piece discusses general market activity, industry or sector trends, or other broad-based economic, market , or political conditions and should not be construed as research or investment advice. The opinions expressed are those of the author and do not necessarily represent the opinions of Enterprise Bank & Trust. Past performance is no guarantee of future performance. No diversification strategy can guarantee against loss.