Brexit Follow-Up – One Ugly Day Later

Quick update on the financial impact of Brexit after one day of trading. Bad in the US, but terrible overseas, especially in financials. Vanguard’s Total World Market ETF was down 5.35%. I like to use that as a proxy for all the assets in the world, which are worth 5% less today than they were yesterday at this time (or, more optimistically, they’re 5% cheaper than they were yesterday). Again, no one knows if this is an over-reaction, if there will be a bounce in the short-term, or if this is the beginning of a big move down. Most importantly, no one knows what the long-term economic impact will be. The unwinding of positions just needs to play out in the market for a while in the short term and a LOT of negotiations, votes, and policy decisions need to be made in Europe over the long-term (likely several years). Here’s where things settled today, with all returns below by representative ETF, in US Dollars (captures market impact and currency impact together):

  • US Large Cap Stocks: -3.6%
  • US Small Cap Stocks: -3.8%
  • US Real Estate Investment Trusts: -0.9%
  • US High Yield “Junk” Bonds: -1.6%
  • Foreign Developed Country Stocks: -8.2%
    • Foreign Developed Value (includes a lot of banks): -9.8%
  • Foreign Emerging Market Stocks: -5.7%
  • Foreign Real Estate Investment Trusts: -6.0%
  • Emerging Market Bonds (Local Currency): -3.3%
  • Aggregate Commodities: -1.8%
    • Oil: -4.8%
    • Gold: +4.9%
  • US Aggregate Bonds: +0.6%
    • US Short-Term Investment Grade Bonds: +0.1%
    • US Medium-Term Corporate Bonds: +0.3%
    •  US Long-Term Treasuries: +2.7%

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