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The worst market sell-off of all time was just the beginning…
Reuters reports global markets shed over $2 trillion on Friday. The previous single-day sell-off record was $1.9 trillion in September 2008. That ushered in the global financial crisis and the Great Recession…
Bloomberg notes the world’s 400 wealthiest investors lost a combined $127 billion on Friday. During the chaos, the Volatility Index (or VIX, the market’s “fear gauge”) spiked 49.33% higher.
The fireworks were a result of the United Kingdom’s decision to leave the European Union (aka “Brexit”—“Britain” plus “exit”).
In the June 16 Daily, we told you the historic Brexit referendum would be the biggest market event of 2016. Here was our final recommendation regarding the vote:
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Make sure you’ve positioned your portfolio for “maximum defense.” Stay long gold and U.S. dollars… and follow PBRG’s risk-management protocol to the letter. |
It was good advice…
Gold surged as much as 7.9% on Friday. And the U.S. dollar appreciated almost 3% against a basket of major world currencies. Both are enormous single-day moves relative to their markets.
But if you think the turbulence is finished… think again.
Billionaire trader George Soros says the Brexit result makes “the disintegration of the EU practically irreversible.” That’s because Britain isn’t the only EU member nation whose people have serious disagreements with Brussels (the EU capital)…
Polling indicates large portions (40-60%) of the peoples of at least eight nations want to hold their own exit votes.
Even the U.K. itself may disintegrate over the Brexit vote. Large majorities in both Scotland and Northern Ireland voted to remain in the EU. Now internal referenda on independence from London in these regions are back on the table…
Source: Ipsos Mori, Bloomberg, Electoral Commission, visualcapitalist.com
Bottom line: The current volatility is not a one-off event. Be prepared for repeated shocks to global markets. Stick to our investment “playbook” of maximum defense. And use the elevated VIX to your advantage.