The immediate fallout from the Brexit vote was a steep selloff in stocks. But when cooler heads prevailed, buyers stepped in.
Despair turns to jubilation? Well, that’s a stretch on both sides.
But jittery short-term traders that hit the sell button are realizing economic activity between the UK and the EU won’t stop simply due to a nonbinding referendum (that will likely be binding).
Risks aren’t going away and more volatility may occur as investors price in the uncertainties of Brexit. But the strong rally last week was encouraging.
Moreover, much of the recent data heading into Q3 has been encouraging, too.
Weekly jobless claims are near a cyclical low, the Challenger layoff report was one of the lowest readings of the last two years, and both the ISM Manufacturing and Non-Manufacturing Indexes exceeded expectations.
Rock bottom yields in Europe bear watching, and we may see some additional aftershocks that could create volatility in our markets. However, an improving US economy is likely to lessen risks to the profit outlook.
