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Opus News & Insights

Whither Brexit, Withering Rates
Friday, July 8, 2016

Quick Look

  • For the quarter, the S&P 500 Index and the Russell 2000 Index gained 2.5% and 3.8%, respectively, while developed international stocks fell 1.5%.
  • U.S. Aggregate Bonds gained 2.2%, continuing to defy expectations as yields around the world fell to all-time lows.
  • Stocks and other risk assets dropped briskly in immediate response to the Brexit vote, but then quickly recovered on expectations of further central bank accommodation.
  • At the close of the quarter, there were still more questions than answers in regards to the impact of Brexit.
  • The political volatility currently exhibited around the world can be tangentially traced to low global economic growth.
  • Studies have shown a strong relationship between current bond yields and ten-year forward bond returns, which would almost certainly connote lower total annual returns for balanced portfolios going forward.
  • To achieve a 6% required return, an investor now has to be willing to take nearly three times the risk with their portfolio as compared to just over 15 years ago.
  • We believe we have entered a period in which the path of annualized returns for blended portfolios is lower.

Modest portfolio gains were made and ultimately held during the spring despite a brief shakeup from the shocking “Brexit” vote at the close of the quarter. The United Kingdom’s June 23 vote to leave the European Union came as a notable surprise, as markets placed an 80% probability of the UK staying in the EU.
Whither Brexit, Withering Rates
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    • 07/12/2017 - Better Than Normal
    • 04/10/2017 - Lately, All Ladders
    • 01/11/2017 - New Regime, Newfound Optimism
    • 10/07/2016 - The Waiting Game
    • 07/08/2016 - Whither Brexit, Withering Rate
    • 06/24/2016 - The Brexit Vote
    • 04/15/2016 - In Like a Lion (or Should We S
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    • 04/13/2015 - Review of First Quarter 2015
    • 02/17/2015 - Divergent Paths: Large U.S. St
         
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