Disclaimer: These are the views of Summit Financial Consulting and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
BREXIT Risk
On June 23rd, the citizens of Great Britain voted to exit the European Union, commonly referred to as BREXIT. The next day, stocks and many global currencies went into a free fall. About $2,080,000,000 of losses occurred, making it the single worst day for global stocks ever, surpassing September 29th, 2008 (Source: http://www.cnbc.com/2016/06/26/brexit-cost-investors-2-trillion-the-worst-one-day-drop-ever.html). This goes hand in hand with the first six weeks of 2016, which was the worst start to a year ever. We’re starting to see a lot of “evers”, wouldn’t you say? The S&P 500 index was negative in 2015, and over the past 12 months, it is negative. S&P 500 revenues have been negative for 5 quarters in a row, and we anticipate another quarter or two of declining revenues (Source: www.hedgeye.com). The jobs report for last month was also very disappointing as we mentioned in last month’s market commentary.
So how did Summit Financial handle this? Long term readers of our market commentary know that we have been predicting global volatility for a long time. Because the polls leading up to the vote were basically a 50/50 split for remain versus leave, we reduced risk within our TD Ameritrade portfolios by selling many holdings. After a great deal of independent research (and a few prayers), we decided to maintain our negative outlook on the global stock markets. Our largest holding (other than the money market) is a fund that invests so that it typically profits when stock markets decline and global volatility increases. Because of this, the TD Ameritrade accounts invested in our managed portfolios had a nice profit for the day. This occurred on a day when the Dow Jones lost over 600 points. As of June 24th, the Nasdaq was down 4.85% for the month, the S&P 500 was down 2.84% for the month (Source: www.finance.yahoo.com), and our portfolios were up for the month over 1.25%. We have made some profitable trades and some unprofitable trades this year, but we want to remind our clients that overall, we feel strongly that our daily management process is a significant value add both in good times and in bad. We feel this is especially true during times of market turmoil like we are currently experiencing.
We cannot predict what will happen in the future. but for the next 3-6 months, we continue to believe that the economy is decelerating, and that prudent risk management is essential in 2016 and beyond. Our goal is to avoid losses whenever possible and hopefully buy in low the next time the market bottoms. We feel avoiding the BREXIT day losses was the culmination of months of research and risk management tactics.
Please remember that we review your TD Ameritrade holdings on a daily basis, and we will continue to do everything we can to protect your principal in the case of what we believe to be a long-term down turn. We will also attempt to be opportunistic if our research points to a good buying opportunity. For now, we’re watching and waiting, but rest assured we have an exit strategy in hand if we need it. If you are a client and disagree with any of the moves inside your portfolio, please contact us to discuss it.
Interesting Points
U.S. credit card debt is on track to hit $1 trillion this year, approaching the all-time peak of $1.02 trillion set in July 2008. – The Wall Street Journal, May 20, 2016
“There are many ways of going forward, but only one way of standing still.” – Franklin D. Roosevelt
In America, from 2001 to 2013, cows killed more people annually than alligators, sharks, and bears combined. – The Washington Post, June 16, 2015
“A study from the Government Accountability Office in 2013 found that 99.6% of federal government’s 1.2 million civil servant workers received a rating at or above “fully successful” in their internal performance reviews.” – The Washington Post, June 14, 2016
A study has revealed that we lose at least one sock each month and around 1,264 over a lifetime. A couple of mathematicians created a formula to predict the risk of laundry losses. – The Daily Mail, April 25, 2015
A shocking 32% of Americans would rather do their taxes, get a root canal, or give up sex for a month than create or update their will. – Rocket Lawyer Survey
For hundreds of years, visitors to Rome’s iconic Trevi Fountain have thrown coins over their shoulder into the fountain to ensure that they return someday. So many tourists toss coins that Roman officials have the fountain cleaned each night, reportedly netting as much as $4,000 in loose change from around the world every day. – Smithsonian Magazine, June 6, 2016
The United States spent over $600 billion on its military in 2014, outpacing its closest rival, China, by nearly $400 billion. – Marketwatch, March 12, 2016
More Americans were shot over the Memorial Day weekend in Chicago than a typical month in battle-torn Iraq. – NBC News, May 31, 2016
Summit Financial Consulting LLC
43409 Schoenherr Road, Sterling Heights, MI 48313
Phone: 586-226-2100 Fax: 586-226-3584 E-mail: info@summitfc.net
Securities offered through Gradient Securities, LLC (Arden Hills, MN (866)991-1539) Member FINRA/SIPC
Summit Financial Consulting LLC is independent and is not an affiliate of Gradient Securities, LLC. Investment advisory
services offered through Summit Financial Consulting LLC, a Registered Investment Advisor in the State of Michigan.
