Broker Check



Week of June 27, 2016

Last week was dominated by the Brexit results and global markets reacted with sharp selloffs.

However, according to the FTSE 100, UK equities were actually up over 2% last week, their best performance in the last four months. Other markets weren't as fortunate. The S&P 500, Dow Jones Industrial Average and the NASDAQ Composite were all down more than 1.5% for the week. European stocks, excluding the UK, were broadly down with Asian equities and emerging markets following suit.


Polls showed a virtual tie going into last Thursday's Brexit vote. Little news was available throughout the day due to laws within Britain that forbid the press from reporting on exit polls while voting is still underway. As the first results started making their way to investors, initial polls showed a neck and neck race with the "Remain" camp and the "Leave" camp trading leads back and forth. It wasn't until late in the evening that votes for the Brexit pulled ahead and news agencies across the UK announced the official results with 52% voting to leave. Interestingly, 72% of registered voters turned out to the polls, surpassing last year's political elections and indicating that British citizens were very engaged in the decision. We will touch on the global markets' reaction to the news in the section below but wanted to stress that there will be much uncertainty in the months and years to come. The process is expected to take nearly two years and negotiations will not begin until this October. Because of this, we do not expect the Brexit to be a short-term event. We will continue to provide updates on the UK economy, Eurozone and the global markets as events unfold.


Market Update

Global markets fell quickly once the results of the Brexit vote became clear. Asian exchanges were open and reacting to the news in real time. Japan's Nikkei 225 Average fell nearly 8% and market futures pointed to sharply lower openings across the world. Even oil fell over 4% on renewed concerns that global growth could stall, possibly starting a global recession. Investors overwhelmingly fled risky assets and poured into gold and government bonds. Indeed, gold was up as high as 5% after the vote while the yield 10-year US treasuries fell nearly 0.20% as buying pressure forced rates down. We had mentioned in our most recent commentary that German 10-year Bunds closed with a negative yield for the first time in history. Thursday's results pushed the 10-year Bunds further into negative territory and as low as -0.14%. Stocks, bonds and commodities weren't the only areas of the market to experience heightened volatility. The British pound sterling seemed to rise and fall with every new piece of news and change in poll leader as the chart below indicates. At one point, the currency had fallen to its lowest level relative to the US dollar since at least 1985. Both the US dollar and Japanese Yen soared as investors sought assets denominated in those currencies. As we mentioned in our introduction, UK equities bounced last week. We would emphasize that this is a perfect example of how markets can react differently than conventional wisdom. This is why we continue to believe investors should keep a long-term focus when it comes to the equity markets and refrain from trying to time events such as these.


Slower Exchanges

IEX Incorporated has passed the first major hurdle in opening its own stock exchange. Perhaps more importantly, the company was approved to open a slower exchange in an age where speed has become king. IEX Incorporated (IEX) first had to convince regulators that an exchange which purposefully slowed the speed of trading would benefit investors, rather than hurt them. While technically "slower", IEX's exchange has the ability to slow orders by 350-millionths of a second. The company claims that the delay is long enough to limit what they believe are predatory practices used by high speed traders yet still quick enough to allow for accurate pricing and liquidity. IEX's stock exchange will become the 13th domestic exchange, competing with the likes of Nasdaq Inc., Bats Global Markets Inc. and International Exchange, the owner of the New York Stock Exchange.

Fun Story of the Week

Did last Monday feel long? We would likely agree the day after the weekend feels longer than others but maybe there was a lot going on at work or at home. Or maybe something bigger, even astronomical, made the day feel longer than normal. June 20 was actually the summer solstice for the northern hemisphere, however, the date can vary depending on one's particular time zone. Coincidentally, the summer solstice is also when the Earth happens to be the farthest from the Sun which seems counterintuitive when temperatures are really starting to heat up for us in the northern hemisphere. In fact, Earth's distance to the Sun has little impact over our seasons. It's the planet's tilt that drives spring, fall, summer and winter. Earth rotates around the Sun at roughly 23.4 degrees so the northern hemisphere is tilted towards the Sun's rays, making the days longer and warmer.

Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC.Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC. 

This newsletter was written and prepared by CWM, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.


The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.


The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.


The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.


The Nikkei 225 Average Index is a Japanese index that tracks the top 225 companies listed on the Tokyo Stock Exchange. It includes the most liquid Japanese stocks listed in the first section of the Tokyo Stock Exchange. It is price-weighted and yen-denominated.

FTSE 100

The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization.


Wall Street Journal, June 2016.

Wall Street Journal, June 2016.

Financial Times, June 2016.

Wall Street Journal, June 2016.

Time and Date, 2016.