Market surprises have already begun
As we continue to look at the second half of the year, we are already seeing some market surprises. On Friday we saw a surprise in the jobs report easily beating the expectation of 170,000 with 280,000 jobs created.
More market surprises to come
We could see more market surprises as we turn our attention to earnings season. Expectations are so low for corporate earnings that we are looking to take advantage of some stock market surprises. In the last two quarters we’ve focused on earnings with the Fed on the sidelines.
Then, Janet Yellen decided she didn’t like being there, took back the front page news with an interest rate increase, and the market sold off.
Brexit sets the stage for more market surprises
Perhaps one of the biggest surprises from the Brexit is that it will force the Fed to stay on the sidelines. If the Fed raised interest rates it would hurt the strength of the pound and the Euro. The Fed staying on the sidelines would allow us to focus on companies making money. Historically when there is a good jobs report, the market rises. Perhaps now we will be able to get some momentum and be able to take advantage of any stock market surprises.
We have received many questions concerning the Brexit and what could happen now. Chancellor George Osborn, England’s equivalent to our Treasury Secretary, stated last week that for the first time in 40 year Britain has the opportunity to reset their own trade agreements. Their objective will be to improve on trade agreements with NAFTA and the United States. He sited that England has $1 trillion in cross investments with the US, a million UK citizens working for American firms and 1 million US citizens working for UK firms.
UK and US could share surprising positive effects from Brexit
US Secretary of the Treasury, Jack Lew, will be in London this week to discuss all this and to help move both countries past the Brexit and turn a negative into a positive. This could be a positive not only for England but for US markets and companies.
We will keep you updated every week. Please keep sending us your questions and comments.
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