We did not think that this would be the outcome, necessarily, but our key theme for 2016 was that it would be a year of volatility so we decided that it would be prudent to be defensive and carry over-weight cash positions in our and our client portfolios. I found out yesterday that someone had referred to this strategy as incompetent. Really?
Well those that follow this apparently incompetent blog can make up their own minds I suppose.
Brexit has happened and the British Pound has plummeted (by 9%) in unprecedented fashion on the news, dwarfing the confident up-tick that it had yesterday. I do feel sorry for the "bookies", there will be some interesting reckoning for them.
Meanwhile equity markets have plummeted in similar fashion:
S&P 500 futures are down approx. 5% at this moment (the limit). I fear that when European markets open shortly they will be down more (Japanese markets are down approx. 8%).
Uncertainty rules and cash (and cash equivalent and government bonds) is / are king! 10 year US Government Bond yields have fallen some 20 basis points (prices are way up) .
The great thing is that through all of what is to come (and that is very uncertain at the moment), there will be some excellent buying opportunities made available to those who have cash on hand. Imagine that for incompetence?
Here is a short note from a client I got a few moments ago (only 11pm on the west coast):
"Being a salesman, I can tell the difference between selling and substance, you have never sold… But if you ever do want one to sell your brand, let me know ;-)"
He is rather happy about his cash position, I think.
We shall monitor developments here on this blog in the days and weeks to come, so tune in for an update if you wish.
Now I will go off to sleep, knowing that our clients and I will sleep better.
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist