The results of the UK referendum last Thursday really caught the market leaning in the wrong direction and going forward a massive fog of uncertainty looms over the market regarding how the entire drama will transpire. Over the weekend, we published a flowchart detailing some of the possibilities regarding how things could play out, but even this complicated web of scenarios doesn’t take into account all of the unknown secondary and tertiary effects. Absolutely nobody knows how, when, and on what terms the UK and EU will work things out. It is just going to take time.
With the understanding that the path forward is murky, we compared the two-day sell-off in equities on Friday and Monday to prior periods in history to get a sense of perspective of where things stand and how the market has reacted in the past. For starters, while the decline in US equities has been sharp, it doesn’t even compare to some of the currency adjusted returns European stocks have weathered. For instance, in many major European benchmarks, stocks dropped more in two days than they have in all but the most extreme two-day periods of the last 30 years. In a B.I.G. Tips report just sent to Bespoke Premium and Bespoke Institutional members, we put the magnitude of the declines Friday and Monday into perspective relative to other steep two-day declines in history. Read the full report by signing up.
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