“Wow! Now What?” That is what a colleague of mine texted to a group of us early Friday morning when he found out about the Brexit result.
Over the years, we have formed a kind of virtual water cooler group.
Somebody else texted back that my puts must be really doing well.
Another “Holy Crap”.
Another person sent back a “congratulations” message to me.
I’m not sure why. For some reason they think I am good at this sort of thing.
Yes I do have some August QQQ puts. And yes I did place a couple weekly calls last week, which I closed out of all but one which of course expired worthless. But the calls were placed just to help cover my losses on my puts. I actually consider myself lucky that I came out ahead throughout the whole (up-down-up-down) pre-Brexit and Brexit event.
I keep telling everyone if I were really good at this sort of thing, I wouldn’t have to work.
But back to the “Now What” question.
My short answer is this . . . What has changed?
As of today, absolutely nothing – except expectations and more uncertainty.
- Britain is still part of the European Union.
- It will take months to even start planning the exit and years to execute.
- If it happens at all. Google “bregrexit”.
- The Scotts and Irish are already planning their anti-Brexit referendums to remain.
- The Fed is still second guessing their rate hike decisions.
- The economy, both locally and globally, is not firing on all cylinders.
- Brexit has only fueled concerns within the financial and European markets.
- There is uncertainty with the coming US elections.
- And, most importantly, the market hates uncertainty.
Analysts have already set the economic and quarterly reporting bar pretty low. So low, that certain companies have been able to beat those low expectations. The problem has been in forecasting.
ADBE is a perfect example. Last week they beat quarterly report estimates. Their projections for next quarter were conservatively in-line. Note, not a bad report. The price tanked 5%.
Now, with Brexit, companies and the market have one more very real added concern to append to their estimates.
The Brexit vote caught a lot of people and the markets by surprise. The fact that Brexit will most likely take several years to complete, is reason enough to think that any huge sudden correction is most likely to be an over-reaction to Friday’s result. I am not sure that the dust has settled yet but at some point it will. And when it does, I suspect that there will be some good bargains out there.
Now is no time to panic and sell everything or jump all in to inverse ETF’s or Gold. Though they certainly could be part of your investment strategy or plan.
You should always have a plan. And your plan should account for changes in market direction and change. Whether it is to be sufficiently diversified, or to actively maintain trailing stops, or to look for undervalue stocks, your plan should not be to make any sudden changes or to panic.
This is the most important answer to “now what”.
Keep calm, stick to your plan. Keep your watch lists up to date. Protect your profits and capital. Look for opportunity.
This much should never change.