Lindsey Report – August ’16

Well the fears that the Eurozone was going to fall into chaos due to the Brexit vote were, as expected, completely overblown. In fact, I have barely read or heard a word about Brexit since it happened, but I did read this comment, which I thought was perfect.

David Riley of the American Funds said, “There is far too much panic centered on this vote. It’s not the end of the world… Mercedez Benz and BMW will still want to sell cars in the U.K.: it’s the second largest economy in Europe and it’s not going to disappear” (Investment Insights).

As noted last month, there was immediate panic in markets both domestically and abroad. However, it did not last long. For instance, in both Britain and Germany, equities (as measured by the FTSE 100 and the Dax) continued their tumble into early July, but both had made a full recovery later in the month. Both are now around their highs for the year (Yahoo Finance).

In the U.S., the S&P 500 quickly recovered its Brexit losses. Moreover, it broke above the 2100 level and then went on to set several, new all-time-highs during July (MSN)! It is now up a little more than 7% on the year.

Staying in the U.S., but staying out of politics, the Commerce Department came out with yet another weak economic report. While many were expecting the economy to pick up steam in the second quarter (Q2), apparently it did not happen. GDP grew at a sluggish 1.2% pace in Q2, which was well below the 2.6% average estimate (Bloomberg).

One bright spot in the report was that personal consumption expanded by 4.2% in Q2. So even though GDP results were weak, our appetite for goods and services remains healthy. Since the U.S. consumer is the backbone of our economy, it is at least encouraging to see growth in spending.  By itself, it’s not enough to boost growth to the 3-4% level I would like to see, but for now it will have to do.

 

 

The opinions voiced are for informational purposes only and are not intended to provide specific advice to any individual. To determine which investments are appropriate for you, consult myself prior to investing. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. The economic forecasts set forth in this commentary may not develop as predicted and there can be no guarantees that strategies promoted will be successful.

 

 

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