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Eurozone

Brexit: What’s the Big Deal and What You Should Know About it?

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By Mack Bekeza

As you may or may not know, The United Kingdom (”UK”) has voted to leave the European Union (“EU”). For decades, the UK has argued left and right whether or not their relationship with the EU is worthwhile. Think of this as an old couple who have been constantly bickering at each other and all of a sudden one of them throws water at the other person telling them to take a hike but then asks them if they can still be friends. In other words, the UK will no longer be a part of the EU but still needs them as a crucial trading partner.

In the midst of this, global markets have experienced some wacky volatility. As of June 27th 12 P.M EST, the British Pound was trading nearly 16% less than it did on the previous Friday morning. The S&P 500 has also experienced a 4% decline as of June 27th 12 P.M EST compared to the previous Friday morning, not to mention that the next jobs report is expected to be dismal, causing further volatility. On the other hand, Gold has shot up and Treasury yields dropped as investors flee to safety, this is usually expected when currencies drop drastically like this.

So what does this all mean to us as investors? Is this the beginning of a global recession? The answer is that we cannot make these assumptions just yet. However, it is crucial to remind ourselves that we should invest for the long term and keep in mind our retirement goals. It is also important to keep in mind that this will be a great opportunity for those who Dollar-Cost Average to take advantage of the lower prices as we should expect a rebound to happen eventually. And always remember the famous quote from the British Government during WW2, “Keep Calm and Carry on!”

© 2016 Castle Rock Investment Company. All Rights Reserved. Please share your insights and comments with us at mack@castlerockinvesting.com or call us at 303-719-7523.

Water Cooler Wisdom: Fourth Quarter 2014

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Water Cooler WisdomMajor events at the close of 2014, specifically the fourth quarter of 2014, included: the abnormally low prices of oil; the unique position of the Federal Reserve and the US dollar; US Treasury Rates poised (still) to rise; and American manufacturing ramped up to march on ahead of other world leaders, while an embroiled Europe awaits the coming year.

“Returns and Valuations by Style”

Significantly improved from the previous quarter, overall market growth was strong in the final quarter of 2014; though the annual return was less than half of the growth from 2013’s phenomenal success.

“Energy Price Impacts”

By a landslide, the most compelling story of the closing chapter of 2014 was the low oil prices brought upon by OPEC with ferocious Saudi leadership striving to re-establish control of global oil markets. Oil production outpaced consumption, therefore supply outpaced demand, and led to a build in inventories. The supply is not uniformly distributed, though, and the United States is responsible for the fastest supply growth since 2013; however, consumption in the US did not grow nearly as much, and China continues to contribute to the most global demand growth. Notably, Europe and Japan’s consumption declined.

The population most effected by gasoline prices, of course, is the lowest quintile of the population. If oil production declines, and global demand growth picks up, then oil prices could move higher, but if the demand trends persist, and supply growth remains robust with neither the US nor OPEC yielding any production, then oil prices could move further down. Economists overall are split either way, but most agree that the current low prices are abnormal. The Federal Reserve expects that any resulting deflationary pressure from current low oil market prices will be transitory, rather than permanent, and that the economy will achieve the 2% target inflation over time.

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