(Because of the market turmoil caused by the Brexit vote, Mike Larson is sending out his Afternoon Edition at this special time.)
They didn’t listen to the elites, the bankers, the academics, and others pushing to maintain the status quo. They didn’t heed the warnings of European Union officials in Brussels, central bankers here and abroad, or heads-of-state around the Continent. Instead, they chose to lay the groundwork for stepping out of the European Union – for better or for worse.
The 52%-to-48% margin of victory … and the turnout of more than 72% … showed just how powerful the “Leave” movement turned out to be. That immediately raised concerns that other nationalist, anti-immigration, anti-bureaucracy movements in countries like France, Italy, Austria and Germany will gain steam, and potentially push for their own referendums.
As a result, the vote results swept like a hurricane through bonds, stocks, currencies, and commodities from Tokyo to Frankfurt to London to New York …
|One flag will soon be missing from the European Union lineup.|
Japan’s stock market crashed so hard, Nikkei futures trading was halted. Germany’s DAX Index collapsed as much as 10.1%, France’s CAC-40 dropped 10.2%, Italy’s MIB fell 11.8%, and Spain’s IBEX imploded 12.8%. The U.K.’s FTSE 100 tanked more than 8.7%.
Our Dow futures plunged almost 700 points, while the S&P 500 futures tanked by more than 100. Interest rates plunged, with the yield on the 10-year Treasury Note hitting its lowest since 2012. Long bond futures soared more than six points in price.
Gold prices soared more than $85 an ounce, hitting a 27-month high. Silver surged to almost $18.40 an ounce, bringing its year-to-date gains to 33.3%.
The British pound crashed by more than 11% overnight, the biggest one-day drop in the modern currency era. The plunge left the pound at its weakest level against the dollar since 1985. The Japanese yen – my favorite “crisis currency” – soared to as high as 100 yen against the dollar.
U.K. Prime Minister David Cameron fell on his sword, announcing he would resign in the next three months.
All of those moves moderated somewhat as European and U.S. traders took over and politicians and central bankers pledged to help soothe markets if necessary. The Bank of England in particular said it was “monitoring developments closely,” and pledged to provide the financial system with as much as $345 billion in liquidity to help it ride out the turmoil. The Swiss National Bank also intervened to prevent the franc from soaring as a safe-haven currency.
|“Let’s be honest. What more can central bankers really do at this point?”|
But let’s be honest. What more can central bankers really do at this point? Since Lehman Brothers went under, they’ve already printed more than $12.3 trillion and cut interest rates more than 650 times around the world. Yet they haven’t succeeded in spurring underlying healthy growth and inflation, and their efforts to juice the markets artificially are having less and less impact.
There’s a very simple reason for that, and it is one I have continually tried to drive home since last summer: The credit cycle has turned! The economic cycle has turned. The “unseen hand” that was working FOR the markets from 2009 through mid-2015 is now working AGAINST them.
When you layer massive political uncertainty on top of those powerful, negative forces, it should come as absolutely no surprise that the “Everything Bubble” is deflating.
The good news? If you’ve been following my advice over the past several months, you should be well-positioned to ride out this powerful market storm. I recommended lightening up dramatically on stocks before last summer’s crash, and suggested you only stick with “Safe Yielders” that have high Weiss Ratings and low economic sensitivity.
I also recommended positions in gold, bonds and currencies that are designed to make the most out of markets like these. That advice is paying off handsomely.
Want to go further? Turn the massive shift in the credit cycle into one of the potentially greatest profit opportunities ever? Well, that’s exactly what I’ve been doing in my All Weather Trader service over the past several months.
My subscribers had the chance to rack up gains of as much as 122%, 140%, 203%, even 269.7% last fall and earlier this year when market turmoil erupted. Now, with Brexit passing … central banks out of bullets … and markets slowly recognizing the problems I’ve been warning about for several months, I believe we could do even better. Just click here to review my e-book on these topics, and to get started with my recommendations.
Until next time,