Key takeaways from the week

  • Stocks recorded their strongest weekly gains of the year following last week's Brexit-induced weakness. This highlights the importance of staying invested through volatile periods because the best days for the market tend to follow its weakest days;
  • While the market's strong performance was well received by investors around the world, we expect volatility to continue to persist as Brexit now joins the line of prominent market risks that includes China, Fed tightening and sluggish global growth; and
  • This week's US jobs report will show the extent to which May's weak report was an anomaly. This will also serve to guide the markets with the potential trajectory of Fed rate increases.

It's going to be bumpy

If ever there was a perfect example of the benefits of diversifying across international markets and ignoring short term noise, June provided it. The FTSE 100, an index comprising the UK's 100 largest companies, exhibited intra-month swings of 10% and ended 6% up for the month.

 The image below shows the changes throughout June and the corresponding headlines:

  1. June 13th - Brexit polls drag the FTSE lower as 'leave' takes the lead.
  2. June 18th - FTSE 100 rallies the most in 4 months as Brexit worry abates
  3. June 24th - Brexit announced - FTSE 100 sees largest drop in 5 months after U.K. voters back Brexit
  4. July 1st - FTSE 100 extends Bank of England boost, marks best week since 2011

This volatility highlights the significance of the Brexit event and how it is perceived in the eyes of the market, so much so that Central Bankers have once again come to the fore to ease liquidity fears.

Over the next 15 months, Germany, Italy, France and Spain are all holding critical votes. Combine this with the fallout of the UK uncoupling from the EU and Scotland's seemingly likely re-referendum, the only certainty is that UK and European markets are in for more of this roller coaster ride.

If you are uncertain about how your investments will be affected, contact us today to discuss managing the ongoing risks of the fall out.

 

Market data

Equity Indices Value Weekly Change
FTSE 100 6,577.83 7.15%
S&P 500 2,102.95 3.22%
Hang Seng 20,794.37 2.64%
Nikkei 225  15,682.48 4.89%
Dax 30 9,776.12 2.29%
Shanghai Composite Index 2,932.476 2.74%
Bonds  Value Weekly Change
US 10 yr 1.46% -7.53%
UK 10 yr 0.86% -25.58%
Commodities / Energy Price Weekly Change
Gold $1,335.79 1.00%
Brent Crude Oil $49.68 1.93%
Currencies Majors Value Weekly Change 
EUR-USD 1.114 -0.04%
USD-JPY 102.55 0.27%
GBP-USD 1.327 -2.67%
Central Bank  Rate
Fed Reserve 0.50%
ECB 0.00%
Bank of England 0.50%
Bank of Japan -0.10%
Prices as at Friday 1 July 2016

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