The Brits Are Out… Here’s the Perfect Post-Brexit Fear Trade
Well, that was an interesting end to the week!
Talk about a seismic shift in the world order.
The markets are coming off a tumultuous day on Friday, in the wake of Britain’s decision to leave the European Union.
As a Brit myself, I’ve obviously had a keen interest in the referendum right from the start – despite the fact that I’ve lived in the United States for too long to actually cast a vote in it.
I won’t perform a full-on post-mortem here. But suffice it to say that since I’d have voted for Britain to remain in the EU, it’s a hugely disappointing outcome.
Not to mention downright scary.
Nobody likes uncertainty – and Britain just got a gigantic smorgasbord of it.
The country has just waved “cheerio” to its largest trading partner, with a slew of protracted new trade negotiations now imminent. There’s no guarantee that those deals will be better – and the ensuing doubt could spell trouble for the economy, the pound, the U.K. labor market, and wages.
The number of areas that voted to leave was shocking, such is the strength of feeling. But I can’t help wondering if people really knew what they were voting for and against.
Neither campaign did a good job of conveying their messages, and amid all the soundbites, sniping, and finger-pointing, I think the public had difficulty separating facts from fiction.
Many clearly used their vote in anger and protest against soon-to-be ex-Prime Minister David Cameron, the government, and the establishment at large. Which is fine… but this will have far-reaching implications in many ways and for many years – long after the current players have gone.
It seems to me that far from the pro-Leavers heralding Britain’s strength, the country has just become smaller, more fragmented, highly divided, and less powerful. More isolationist than inclusive.
The only bright spot? I’m heading back home next Wednesday – and with the pound getting absolutely battered against the U.S. dollar (to levels not seen since 1985 at one point), the exchange rate just got a whole lot better! It’s a small consolation, though.
Such volatility was on the mind of our technical whiz, Jonathan Rodriguez, this week.
He discussed how investors can turn fear into profit – and has a clear answer: “Short-term traders are having a field day with it.”
He looked at “one of the strongest fear plays in the market right now” – and you can find out what it is here. Be sure to check out our other featured columns this week, too.
Enjoy your weekend,
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EDITORS PICKS OF THE WEEK
Elsewhere in Wall Street Daily this week…
- Chief Technology Analyst Louis Basenese addressed Friday’s recalibration of the Russell indices, to which over $850 billion are tied. This year, Convergex estimated nearly $50 billion in turnover caused by this reconstitution, involving 398 stocks. Hopefully many investors were able to profit from buying and selling according to the stocks that were added and removed from the list of companies in flux. It’s only a matter of time before the market reveals the effects of the index rebalancing as it coincided with Britain’s decision to leave the European Union.
- Senior Analyst Greg Miller continues his breakdown of the future of Smart Homes and the Internet of Things. This week he finally divulged the best way to invest in this burgeoning technology. Ultimately, there are several key factors for getting involved on the ground floor of Smart Home systems. No matter whether and investor has major cash to put down on the bigger names in tech innovation or wants a minor stake in a brand new patent, it’s crucial to stay alert and keep an ear to the ground as the Internet of Things continues to promise major profits throughout its evolution.
- Investing in bonds, on the other hand, has devolved into something increasingly dangerous. Global Markets Analyst Martin Hutchinson examines the value trap of long-term bonds. He explains that “bondholders, which include savers and pension funds, have less political power than borrowers, and are on the opposite side of the table from the government.” With inflation on the rise, the government could potentially move to rein it in and do major damage to this type of investor. Hutchinson lays out the best way to avoid major losses and play the bond game post-Gold Standard.
- Alan Gula, Wall Street Daily’s Chief Income Analyst, revealed the problematic approach that the Fed has taken in analyzing unemployment data. According to the Bureau of Labor Statistics (BLS), there are 7.4 million unemployed Americans, but that number doesn’t count marginally attached workers and those forced to do part-time labor. Including those without full-time employ, the rate jumps to 9.7%. Rather than establishing a reliable method by which to address America’s jobless population, Yellen and the Fed use this number to maintain control over central bank intel.