Defensive Assets Saying Be Careful With Brexit Stock Rally

by Chris Ciovacco
Financial Sense

The Weight Of The Evidence

Looking at the stock market in isolation last week, it appeared “risk-on” was back in a big way. However, a peek behind the bull/bear curtain, painted a very different picture. From The Wall Street Journal:

After Lehman Brothers fell over in September 2008, equities slumped, then rallied back to their previous levels within a week. Brexit isn’t Lehman, but the stock market is behaving similarly…In 2008, shareholders made an epic mistake: They assumed Lehman would be manageable. This time the assumption is that central banks will ride to the rescue and corral any problems. Investors expect global easy money, adding yet another central-bank prop to the stockade protecting shares from weak economic growth. The result is some unusual, and worrying, behavior in the bond market. Since the Brexit vote, Treasury yields have tumbled, and they kept falling even as shares recovered.

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