June 26, 2016 Brexit

Risk/Reward Vol. 311

THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.

My summer schedule is such that publishing Risk/Reward may be sporadic. In other words, I am having too much fun on Friday and Saturday to bother with composing it. That said, what happened this week is too important to go without comment.

As I wrote in the last edition (http://www.riskrewardblog.blogspot.com/ ), until very recently Europe's elites had underestimated the likelihood and the impact of Brexit. Going into Thursday's referendum the vote was slated to be close, but markets across the globe were convinced that Britain would remain in the European Union. I continued to monitor the situation but saw no reason to sell given that stocks continued to perform well. Indeed with the early returns showing that Brexit would be defeated, Thursday proved to be a major up day. After the close of the United States stock markets that day however the vote began to turn. By Friday morning Brexit was a reality. Predictably the markets tumbled as uncertainty reigned. And as we all know Mr. Market abhors uncertainty. By Friday's close both the Dow Jones Industrial Average and the S&P 500 had fallen 3.5 %. That fact notwithstanding both were down only 1.6% for the week.

As for my portfolio, I too took a hit on Friday but remained positive for the week. As stated I monitored the situation closely throughout the week and do not second-guess myself in staying put except in one respect. I should have sold Shell and BP before the close on Thursday. Had I done so I would have mitigated half the loss that I experienced on Friday. Holding those Eurocentric stocks was not worth the risk of Brexit no matter what the odds.

I believe that Friday was the worst of it and that we should see a positive return next week