There’s never a dull news week these days, so even with the Muller report behind us (vindicating Trump completely), there’s still a lot in the headlines to capture our attention. Top of the list: Brexit. On a personal note, I’ve always hated this manufactured word, almost as much as I did Brangelina to summarizes the then-marriage between Brad Pitt and Angela Jolie. Tabloid stuff, but the world adopted it and it stuck. So are we with using Brexit then it seems. Anyway, with Britain less than 2 weeks away from crashing out of the European Union without a deal, the question turns to: what effect will this have on capital markets?
Well, the last time Brexit was front-and-centre, equity markets sold off 10% in 3 days. So we may well see this repeated. What is important to remember is that the markets recovered from this selloff within a month and haven’t looked back. No guarantee this will be the case this time, but what matters is the overall global outlook, which still looks better than any single issue -Brexit included.
Interest rate hikes are slowing, if not stalled, which suggests the global economy isn’t as strong as earlier forecasts. Canada is no exception here, with economic growth grinding to a halt in Q4. Not even with this noticeable change in the air, our outlook is for further economic expansion and further market gains. 2020 is another matter. But for now, our commitment is to a our slightly higher equity allocations than in previous years. We don’t want to miss the tail-end of the 10 year Bull Market.
So we’re watching the markets closely and expect volatility to take the form of market swings and probably to the downside. But today's volatility is tomorrow opportunity. Market dips give your institutional wealth managers the chance to deploy their cash and buy great companies trading at a discount.
Our portfolios are globally diversified and conservatively balanced, so we’ll ride out the next 2 weeks pretty well. No worries -Britain has been around for a thousand years longer than the EU. My money is on them.