Why the worst of the Brexit storm is yet to come for markets


Source: Market Watch Personal Finance

Are the brakes on the “Brelief” rally? Dow futures aren’t doing much this morning, slowing down after blue chips soared 554 points in two days.

That two-day rebound was welcome in the face of gloomy predictions, but it would be foolish to assume risk assets are out of the woods just four sessions into the post-Brexit world, says Peel Hunt strategist Ian Williams.

“Everything does seem to be looking incredibly stable,” but “further volatility should be expected in due course, as the next steps to leaving the EU become clear,” Trustnet Direct analyst Tony Cross says.

“Despite the hiatus caused by the Brexit vote, the FTSE 100 is on course for its best month since October 2015,” Cross adds.

Our call of the day is cautious, with a warning on more fallout from last week’s Brexit vote.

Today’s chart keeps the focus on the U.K.’s pricey planned divorce from the EU, highlighting the country’s leadership problems.


ESU6, +0.85%

 and Dow futures

YMU6, +0.89%

are little changed in this final trading day for 2016’s first half, and Europe

SXXP, +1.04%

 is also showing muted action. Asia mostly finished with gains.

The pound

GBPUSD, -1.3478%

  — a good gauge these days of how frisky traders are feeling — is down 0.3%, while gold

GCQ6, -0.57%

 , oil

CLQ6, -2.39%

 and a key dollar index

DXY, +0.59%

are all declining.

Don’t be seduced by the price action in markets in the last few days, as “the worst is yet to come,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

The pound’s “firmer tone” isn’t based on positive developments in the U.K., and the country is facing political leadership challenges, he says. Sterling’s gains are actually due to buying by momentum traders, as well as quarter- and month-end positioning by institutional investors.

The Brexit shock still likely needs a few weeks to feed into economic reports, and policy responses largely have yet to be seen, Chandler argues.

Plus, don’t forget the quirks of the calendar, such as the upcoming Independence Day holiday (U.S. independence from Britain, not the latter’s from the EU).

“The U.S. holiday on Monday may also discourage new position-taking, and then one might as well wait until the U.S. jobs report on July 8,” he writes.

Even Italy poses new risks, in view of the battering its bank shares have taken this week. “Italy’s attempt to address its banking system was faltering before the U.K. referendum, which effectively made things worse,” Chandler says.

Go here to Chandler’s Marc to Market blog for his full laundry list of Brexit worries, then perhaps go read why actually “you have to invest” at the Wealth of Common Sense blog.

“Our strategy is to highlight how much trade and positive agreements among our nations are good not only for the economy of the world and the economy of our countries, but it’s also good for our citizens.” — Canadian Prime Minister Justin Trudeau pushes back against the anti-free-trade trends at a meeting of the “Three Amigos” (Trudeau, President Obama and Mexico’s president).

See: Trump threatens NAFTA pullout as he links Hillary and Bill Clinton trade policies

The man seen as a possible star in the U.K.’s exit talks with the EU is out of the picture, in a shock announcement Thursday.

Maybe we should have expected the unexpected? Boris Johnson had just been called a “maverick who hates to abide by the rules” in the London Evening Standard newspaper’s graphic, shown above.

The former London mayor had been seen as poised to replace David Cameron as leader of the Conservative Party and so become the U.K.’s next prime minister. But he was facing competition from other Tory bigwigs, such as Home Secretary Theresa May, and — as of this morning — Brexit ally and Justice Secretary Michael Gove.

“Beneath the blond mop, a famous intellect is being used for top-level plotting,” says the Standard graphic, which was inspired by the board game “Operation.” In other words, BoJo might try to act like he’s Homer Simpson, but he’s really Mr. Burns.

Certainly, minds are racing to work out why Johnson ruled himself out of the race, after being one of the favorites. What is known is that the move only heightens the political turmoil.

“British politics is in its greatest upheaval in decades. Nobody is in charge,” The Economist says.

#BorisJohnson right now. pic.twitter.com/BivmnqgOrq

Robo adviser Betterment is defending itself after coming under fire for halting trading after the Brexit vote.


AMZN, +0.00%

second “Prime Day” is scheduled for July 12.

EU leaders have drawn “a stark line,” saying the U.K. can’t keep valuable business links in a seamless single market, if it doesn’t also accept European workers, the AP says.

“The U.K. economy will slow, but it won’t be a calamity,” Carlyle CEO David Rubenstein told Bloomberg TV, and George Soros says Brexit isn’t a done deal.


YHOO, +1.63%

 shareholders have their annual meeting, while Starz

STRZA, +8.50%

  and Lions Gate

LGF, -1.34%

 said they plan to merge.

Darden Restaurants

DRI, -2.85%

 , ConAgra

CAG, +0.44%

 and Constellation Brands

STZ, +3.12%

 have been among the companies posting earnings ahead of the open.

Weekly jobless claims rose to 268,000 while economists expected 265,000, and a report on Chicagoland’s business conditions is due at 9:45 a.m. Eastern Time.

On the Federal Reserve front, St. Louis Fed President James Bullard is expected to speak in London at 3:20 p.m. Eastern. This follows Fed Governor Jerome Powell warning late Tuesday that Brexit has shifted global risks “even further” to the downside.

In Brexit-battered Britain, the Bank of England’s Mark Carney is due to sound off at 11 a.m. Eastern.

$140 million — That’s the max value of the richest contract in NFL history. The Indianapolis Colts just inked the deal running through 2021 with their quarterback, Andrew “I’m In” Luck.

Mike Ditka says he agrees with Trump, but declines an invitation to speak.

A grizzly killed a mountain biker near Glacier National Park.

Nicholas Taleb is reportedly running a poll on whether a rival economist pumps iron.

No Rio for Lolo.

Have you heard about Finnish baby boxes?

A Muslim-American’s death at Parris Island sparks a Marine Corps probe.

FDA: No more eating raw cookie dough ever https://t.co/JVcxWiaayA pic.twitter.com/uID9InIQK6

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. Be sure to check the Need to Know item. The emailed version will be sent out at about 7:30 a.m. Eastern.

Source: Market Watch Personal Finance

This chart shows Volkswagen’s ‘generous’ payout for your polluting diesel car


Source: Market Watch Personal Finance

Volkswagen is willing to pay nearly 10 times as much as the highest-ever auto maker settlement to atone for its emissions sins.

The auto maker

VOW, -2.52%

 submitted settlement terms worth $14.7 billion to a federal judge on Tuesday. The plan includes $10.03 billion for owner compensation, $2.7 billion to an Environmental Protection Agency fund and $2 billion for clean-vehicle initiatives. If approved, the plan would allow about 475,000 diesel vehicles to be bought back by the company at their value before the scandal was announced or have their cars modified to comply with federal emissions standards. Both options provide additional compensation between $5,100 and $10,000 based on the car’s pre-scandal value, according to the New York Times. Volkswagen has said that it has set aside $18 billion for financial penalties related to the scandal.

Volkswagen came under fire in September when it was discovered to have fitted 11 million diesel-fueled vehicles world-wide with a “defeat device” that allowed it to cheat federal emissions tests.

The nearly $15 billion settlement deal dwarfs what other auto makers have paid in the past for faulty vehicles. After recalling 5 million vehicles in 2009 and 2010 for unintended acceleration issues that resulted in 93 death complaints filed to the National Highway Traffic Safety Administration, Toyota

TM, +1.47%

paid $1.4 billion to settle a class-action lawsuit and a $1.2 billion penalty to the Justice Department. General Motors

GM, +0.90%

 faced similar charges after a faulty ignition switch in certain vehicles was linked to more than 120 deaths and resulted in the recall of more than 2 million cars in 2014, paying more than $2 billion in consumer harm claims and a $900 million federal penalty.

“It’s a huge amount of money,” says Karl Brauer, a senior analyst for Kelley Blue Book, talking about VW’s settlement offer. “This could go down for a long time as the most expensive in industry history.”

While no immediate deaths have been directly attributed to the Volkswagen scandal, what sets it apart from Toyota and GM is that it clearly intended to deceive officials and customers, so it wasn’t just an issue of not enough oversight in the production process, Brauer says.

Read more: Volkswagen deception will be hard to forgive

Despite the record size of the settlement, industry experts say it probably won’t be the silver bullet Volkswagen needs to fully recover from the scandal. “This massive financial hit won’t magically make VW’s troubles disappear overnight, and it still has a long road ahead to repair its reputation among car shoppers,” said Jessica Caldwell, director of industry analysis at Edmunds.com, in a statement.

As Volkswagen continues to rebuild its reputation, affected vehicle owners have much to gain from their efforts. Owners of select TDI diesel engine models of the Beetle, Golf, Jetta, Passat and Audi A3 qualify for the settlement, and consumers can find out if their car qualifies by entering the vehicle identification number into Volkswagen’s settlement website.

Even if owners already sold their car in the wake of the emissions scandal, they still qualify for the cash compensation as long as it was sold between Sept. 18, 2015 and June 28, 2016, according to Volkswagen. Compensation is expected to be completed by December 2018, according to the New York Times.

Volkswagen owners stand to receive anywhere from about $12,500 to nearly $33,000, depending on the model and model year, while Audi owners could receive between about $19,000 and $44,200, according to the National Automobile Dealers Association Used Car Guide, which Volkswagen used to determine car values. Volkswagen lessees could receive between $2,600 and $4,000 while Audi lessees could see payments between $3,700 and $4,900.



The buyback terms have helped mitigate owners’ concerns that Volkswagen would only offer vehicle repairs as a form of compensation, which could potentially affect the performance and fuel efficiency of their cars, Brauer says. The option to sell back their vehicle allows owners to research how the repair modifications would affect their car with a viable alternative if they are dissatisfied with the changes.

“Volkswagen has done a good job of protecting itself from any claims that it didn’t do enough from a consumer standpoint,” Brauer says.

Because of the global scope of the scandal, there are very few, if any markets Volkswagen can resell the bought-back vehicles in. The cars the company buys from consumers will most likely be recycled for spare parts, which is good news for owners of recent Volkswagen models in need of repair or maintenance, Brauer says.

And there could be even more money coming. The settlement cost figures are based on the assumption that 85% of vehicles will be bought back or repaired. If Volkswagen decides to target the leftover 15% who have kept the affected vehicles, it could offer more incentives on top of the compensation deal, Brauer says.

Source: Market Watch Personal Finance

A young bachelor’s apartment could be cleaner than you think


Source: Market Watch Personal Finance

The stereotype of the young single man’s home as part compost heap and part nuclear waste facility may be dead.

Young men in their 20s and 30s seem to be embracing their domestic side, according to a study by research firm Mintel. And it’s not just laundry, this group is spending more time cleaning their apartments than an average consumer.

While their standards of cleanliness have traditionally been lampooned, men ages 18 to 34 report spending over six hours on average personally cleaning their home in one week, much more than women in the same age group do — 4.8 hours — and well above the overall consumer average of 4.6 hours.

The company spoke to around 2,000 American young adults and found that 61% of them claim to have sole responsibility of cleaning their home. “While cleaning is a universal chore for consumers of all types, moms, middle aged women and younger men appear to bear the brunt of the work: 79% of moms with kids under age 18 in the house, 71% of women age 35 to 54 and 68% of men age 18 to 34 take sole responsibility for housecleaning,” the report said.

PepsiCo will now offer two versions of Diet Pepsi in an attempt to stave off falling diet cola sales.

Young men are now cleaning more often because, well, they have to – more young men now live alone and are entrusted with the responsibility of maintaining their houses. “We see young men delaying life decisions such as marriage and see more young men living by themselves,” Stephen Brown, Household Care Analyst at Mintel said. The Pew Charitable Trust , quoting Census Bureau numbers, said that the number of men living alone has gone up from less than 6% in 1970 to 12% in 2012. There has also been an increase recently in people in their 20s living alone, though it’s down slightly from its peak before the recession in 2008, and 2013 marked new highs in living alone for people in their early 30s, the report said.

Consumer products companies are surely going to target this undiscovered and conscientious demographic. In addition to spending more time cleaning than virtually any other group, young men are also significantly more likely than the norm to have positive feelings about clean homes and to find housekeeping enjoyable (70% men aged between 18 and 34 versus 43% overall).

Among manufacturers of household supplies, this hasn’t gone unnoticed. Over the last few months, there have been more men-focused products on the shelves than ever before. From candles, detergents and washing machines to yoghurt and soda, companies have released a range of products for men.

While parents — and mothers, in particular — remain the priority for household cleaning brands, Mintel’s research shows that younger men assume quite a bit of responsibility for maintaining a clean home, Brown said. “This trend may be due to both younger men being inefficient cleaners, as well as fathers with young children at home doing more to pitch in.”

“Young men may also be overestimating the amount of time spent and responsibility for cleaning, resulting in more aspirational than actual figures,” Brown added. “Regardless, it is clear that younger men are an important emerging market for cleaning products and supplies.”

Of course, there’s also the matter of what young men mean by “clean.” While over 55% of the consumers said that clean means “things looking tidy” and about 51% said “no visible dirt or dust”, fewer than 41% of young men agreed to that definition. To them, the cleaning ends when tiredness or time crunch sets in. About 15% of young men say that they are done cleaning when they are tired of doing so and 10% say they stop when they have run out of time.

It helps to start small. The fact that U.S. households are getting smaller — in terms of both apartment square footage and number of people living in single family homes — may make it easier for men (and women) to do their own cleaning, Mintel said. The average household size has decreased from 2.57 occupants in 2006 to 2.54 in 2016, while one- and two-person households have increased 14.5% and 10.9% over the last 10 years, Mintel said.

But it isn’t just young men who are pressed for time. Three in five consumers Mintel spoke to said that they’d keep their homes cleaner if they had more time, and that convenience is more important than perfection. Consequently, more consumers are willing to spend a little extra on products that save time, as evidenced by the fact that over the last two years, sale of wipes grew 17.5% since the products are fast and easy to use.

Source: Market Watch Personal Finance

The worst day to fly if you want deals on airfare


Source: Market Watch Personal Finance

If you want cheaper plane tickets, you may need to change the timing of your trip.

According to data that airfare research firm Hopper.com ran for MarketWatch, airfare tends to be cheapest for people who fly on a Tuesday or Wednesday, compared with other days of the week. On a Sunday (the most expensive day to fly), you may pay nearly 10% more to fly than you would on a Tuesday or Wednesday, according to the Hopper analysis, which looked at flights over the last year that were planned at least two weeks in advance.

“Sunday tends to be expensive both because it’s a weekend, which is popular with leisure travelers, and because it’s often favored by business travelers looking to get where they’re going for a Monday start,” explains Patrick Surry, the chief data scientist at Hopper. Furthermore, he adds: “Some airlines take advantage of that by charging more for round-trip tickets that don’t include a Saturday night stay.”

Best — and worst — days to fly if you want airfare deals

The month of your trip matters too. The most expensive months to travel are July and December, when you’ll pay nearly 30% more than what you’ll pay in January or February, which tend to be the cheapest months to travel. “The deep winter months are usually cheap because travel demand is lowest, and airlines tend to discount to keep their planes full,” says Surry.

Best — and worst — months to fly if you want airfare deals

Of course, notes Surry, “there’s no simple rule that works every time,” so sometimes there are deals to be found on Sundays or during July and December, for example; still, it’s worth playing with the dates of your trip to see if you can save by flying on a Tuesday or Wednesday or during a different month, the data show.

Subscribe to the right Twitter accounts.

Patti Reddi, the founder of travel website The Savvy Globetrotter, says that “Twitter is the best way to learn about limited time airfare deals.” In addition to following the airlines on Twitter, she recommends following the following for flight deals: @theflightdeal, @airfarewatchdog and @secretflying (and signing up for their email newsletters). “I frequently see U.S.-Europe roundtrip flights for under $500 posted on these Twitter accounts,” she says.

Consider a layover.

As my colleague Shawn Langlois recently discovered, choosing to have a layover may save you money. Check out site CleverLayover.com to figure out whether a layover may be right for you, he writes.

Combine discount airfares.

Eric Urbain, the North American general manager of travel search site liligo.com says that you can sometimes save up to 70% off airfare “by booking two one-way tickets with two different low cost airlines like Spirit or Frontier.”

Look at nearby cities.

Consider booking a cheap flight to another, nearby city and then continuing your trip to the city you’re going to via another airline or train,” says Reddi. “For long-distance flights, build your own itinerary by combining a super-cheap long haul that gets you to the region you want to go with a low-cost regional airline that won’t show up on international flight scanners,” explains tech consultant and frequent traveler Jonathan Weber. “For instance, it’s easy to get sub-$400 flights from East Coast U.S.A. to Norway with Norwegian Airlines. Combine this with a $50 euro Ryanair flight, and you can get to London, Paris, or just about anywhere in Europe for less than half of what most people pay for the cheapest direct flight.”

Don’t forget about the fees.

While it’s tempting to book just based on ticket price, that can be a big mistake: Low-cost airfare isn’t always the best option,” says Urbain. If you’re checking bags, consider baggage fees. It’s also worth going on airline sites to see what other fees they will charge before booking.

Consider booking directly with the airline.

Many airlines are now offering deals and discount codes on their own websites that aren’t available on the online travel deal aggregators. So while experts say you should still check online travel sites for deals, don’t forget to check an airline’s site too.

Book early.

“For domestic tickets, book three months in advance. International tickets should be booked six months before the dates of travel. Prices gradually increase as the departure date approaches, so do it ASAP,” says Urbain.

You’re invited:

If you’ll be in the San Francisco Bay Area at the end of July, we’d like you to join us for a special event focusing on retirement issues for women. The X Factor: Retirement Matters for Women is a free, two-part event designed to bring expert analysis and actionable information to consumers and professionals on how to plan for the best possible retirement.

On Wednesday, July 27 in San Francisco financial advisers and investors are invited to join us for an evening of cocktails and conversation about Social Security claiming strategies, tax-advantaged investments, longevity risk and more. Bob Powell will be the moderator, and our guest panelists will be Eleanor Blayney, Consumer Advocate for the Certified Financial Planners Board of Standards; Sabrina Lowell, Chief Operating Officer, Mosaic Financial Partners; and Frank Paré, President and Founder, PF Wealth Management Group. For more information or to RSVP, send an email to MarketWatchReception@wsj.com

On Thursday, July 28 at Dominican University in San Rafael, Calif., we invite women and couples to join us for a panel discussion and luncheon specifically designed to help people develop a holistic approach to retirement planning, focusing on both financial and lifestyle objectives. Our guests will come away with specific lists of essentials: must-dos and how-tos. For more information or to RSVP to this event, send an email to MarketWatchEvent@wsj.com

Both events are free and open to the public, but seating is limited and reservations are required. Please note the different email addresses for RSVPs for each event

Source: Market Watch Personal Finance

20 beaten-down U.S. stocks expected to rise as much as 98%


Source: Market Watch Personal Finance

After many years in the financial media, I’ve come to realize that many investors will never learn what to do during a panic.

That’s because, inevitably, they forget their long-term strategy and dump their investments. As a result, they miss out on the inevitable recovery.

Inevitable? Yes. As we saw Monday, even a two-day decline of 5.3% in the S&P 500

SPX, +1.37%

caused by Brexit, can be reversed quickly. On Tuesday, the benchmark index rebounded by almost 2%.

Here’s a look at 10 stocks that analysts at investment bank Jefferies think investors should buy, because they declined more than they should have, in the wake of Brexit, or Britain’s decision to leave the European Union.

But what about stocks that have suffered even more? Patient investors who jump into a stock or an industry on the rebound can ride the wave and see very strong returns in the long run.

So we decided to take a broad look at the U.S. market for bargains. Using data supplied by FactSet, we began with the S&P 1500 composite index and identified 481 companies whose stocks were down at least 20% (with dividends reinvested) for the past 12 months, through Monday.

We then narrowed the list to 89 for which at least 75% of analysts had “buy,” or equivalent, ratings. We pared that list of 89 further to 66 companies with at least five analysts rating the shares “buy.”

Here are the 20 remaining companies with the most implied upside potential, based on consensus 12-month price targets:

The purpose of the list is to present you with potential stocks for further research. You have two feathers in your cap: The stocks have already tanked, and analysts love them. But analysts might be wrong. If you see names of interest, the next step is to read what you can about the companies and consider whether their business strategies are likely to lead to expanding sales over the long term. That can lower your risk and make high returns more likely, if you are patient.

Also see: Three ways to profit as investors panic about Brexit

Source: Market Watch Personal Finance

After Brexit, get ready for a Breturn as Britain reverses course


Source: Market Watch Personal Finance

The pound is in free fall. The London stock market tanked for two days. Big banks are looking for offices in Frankfurt and Paris, and businesses have hunkered down in their bunkers and postponed making investments.

And Facebook

FB, +0.93%

 has been turned from a place to swap funny kitten videos into an arena for trench warfare between the outraged supporters of the EU and the die-hard Leave campaigners. To say the British have not taken last week’s vote to leave the European Union calmly would be the understatement of the century.

A petition to hold a second referendum has hit close to four million signatures. Polling shows that more than a million of the Leave voters regret their choice. A new prime minister has still to be chosen and a negotiating strategy for getting out has yet to be decided. There are at least two years until the U.K. finally goes through the exit door, and the political mood is so febrile, it can hardly be guaranteed that step will ever be taken.

The markets have yet to take this into account. While traders have been furiously pricing in the impact of Brexit on both the British and the global economy, there is another possibility they have not even begun to consider: The U.K. may not leave the EU at all, or it may do so in such a tepid way that it hardly counts as quitting. Let’s call it a “Breturn,” as the country returns to the status quo. And since the currency

GBPUSD, +0.9293%

  and the stock market

UKX, +3.58%

  plunged on quitting, presumably they should soar should a Breturn take place.

The markets did not see a Brexit majority coming, and nor did the political establishment. The polls always said it was going to be close, but most people chose not to believe them. The decision, when it came, took most investors by surprise, and there was a frenzied wave of panic selling that drove asset prices down right across Europe and, indeed, the world.

In the U.K., however, you would expect the mood to be one of jubilation. After all, this is what the majority of people voted for. There is very little evidence of it, however. A few die-hard Leavers aside, the mood of the past week has been one of anxiety and remorse. There is growing evidence that many people want to fight back against the decision to leave, and their voice is growing in strength.

An online petition demanding that a decision to leave the EU should mean that a majority of 60% on a 75% turnout be required has garnered huge support. It has put on 20,000 votes since I started writing this column and has now passed four million. A poll for the Independent found that 1.1 million of the 17 million Leave voters now regret their decision. On Tuesday, Health Minister Jeremy Hunt argued that there should be a second vote before the U.K. actually left. Expect to hear a lot more of that as the implications of the vote to leave sink in.

Could that actually happen? The answer is surely yes. In fact, there are three scenarios in which it is perfectly plausible that Britain might stay in the EU after all.

The most obvious is a second vote. Leaving the EU is not going to be a simple task for whoever takes over from David Cameron as prime minister. The process takes two years and will require long negotiations about a new trading relationship between Britain and the rest of Europe. A huge amount of legislation will have to be unwound and replaced. After 40 years as part of an increasingly powerful EU, getting out of the web of different treaties and responsibilities will take a huge effort. At the end of that process, a compromise will inevitably be reached, even if it might be messy and won’t please everyone. It would be perfectly sensible for the prime minister to then put that to the vote in another referendum, in which the option of remaining would be on the ballot.

Alternatively, there may well be a general election before Britain actually leaves. A new prime minister will certainly need a clear mandate to push through such a momentous change of course for the county. Who will win that? Right now it is anyone’s guess. But if people feel as strongly about staying in the EU as they say they do, there is no reason why a pro-EU party, such as the Tories’ former coalition partners the Liberal Democrats, should not storm to power. Then the decision would be reversed.

Finally, the U.K. might well negotiate a form of associate membership that is virtually identical to staying inside the EU. Already, it looks as if the most likely outcome is the “Norwegian model,” where the U.K. retains access to the single market in exchange for accepting the free movement of labor and many EU rules. It may well turn out to be Norway-plus, which involves some role for the U.K. in decision making. Given that the country is already outside the euro, it would take a very large magnifying glass to actually tell the difference between that and staying in. It would have lost some influence, but unless you are a diplomat or politician, that is of little consequence.

If the U.K. takes any of those paths, it will effectively be back in. For investors, that matters. Billions were wiped off equity markets as the result became clear. Currencies have been in turmoil ever since, and the real economy, both in Britain and the rest of the world, will be impacted soon. But if the decision is reversed, then those markets will recover as well. The pound will be back up to $1.50, as it was last Thursday night when the polls indicated Remain would win. Equities will follow.

Of course, it remains to be seen what actually happens. One thing is certain, however: The Brexit, or Breturn, saga has a long way to run.

Also read: 5 ways to stop Brexit from happening

Source: Market Watch Personal Finance

FTSE 100 surges to end above pre-Brexit levels


Source: Market Watch Personal Finance

U.K. stocks surged nearly 4% on Wednesday, helping the FTSE 100 erase all of its losses and then some in the wake of the U.K.’s vote to leave the European Union.

Risk appetite was reignited for a second straight session as concerns over the global impact of the so-called Brexit vote, or British exit from the EU, receded. The FTSE 100

UKX, +3.58%

jumped 3.6% to close at 6,360.06, with only three components finishing in the red. The index is back in positive territory for the year, up 1.9%.

The rally left the benchmark higher than Friday’s close of 6,138.69, when blue-chips collectively dropped 3.2% after the majority of voters in the U.K.’s Brexit referendum. The index is above Thursday’s close of 6,338.10, before the voting results were known.

The U.K. has yet to invoke Article 50, which will start a two-year process of exit talks between U.K. and EU officials. EU leaders in Brussels on Wednesday pressed for negotiations to begin quickly. But Britain’s Prime Minister David Cameron, who announced last week that he’s resigning, said he’ll leave the negotiations to his replacement. His successor is expected to take over before the fall.

Equity markets “have looked past the Pandora’s box of politics and have continued to move higher,” said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

The FTSE 100 on Tuesday leapt 2.6% after two days of heavy losses.

Wednesday’s rise has “been much broader-based with oil and gas stocks, house builders as well as financials leading the gainers,” Hewson said, “though travel stocks have remained under pressure over concerns that a weaker pound and the recent terrorist attacks in Turkey could deter U.K. consumers from going abroad.”

The midcap FTSE 250 index

MCX, +3.22%

 also leapt Wednesday, up 3.2% at 16,002.90. But that index is still below Friday’s close of 16,088, which marked the start of a two-day rout. More companies on that gauge have bigger exposure to the U.K. economy than those that make up the larger-cap FTSE 100 index.

Banks bounce up: Banking heavyweights Barclays PLC

BARC, +4.90%

BCS, +3.42%

 and HSBC PLC Barclays PLC

HSBA, +2.06%

HSBC, +1.09%

 surged 4.9% and 2.1%, respectively. The shares brushed past Moody’s decision released late Tuesday to change its outlook to negative from stable on eight U.K. banks—including Barclays and HSBC—as well as the U.K. banking system.

There will likely be “reduced demand for credit, higher credit losses and more volatile wholesale funding conditions for U.K. financial institutions,” as a result of lower economic growth and heightened uncertainty about the U.K.’s trade relationship with the EU,” Moody’s said in a statement.

Insurer Prudential PLC

PRU, +5.50%

 climbed 5.5%, and home builder Persimmon PLC

PSN, +7.44%

 leapt 7.4%.

Other movers: Shares of major oil companies BP PLC

BP., +5.03%

BP, +4.93%

 and Royal Dutch Shell PLC

RDSB, +4.64%

RDS.B, +4.26%

 climbed 5% and 4.6%, respectively, as oil prices

CLQ6, +2.63%

LCOQ6, +2.53%

charged up nearly 3%. Oil futures rose as U.S. crude supplies fell for a sixth consecutive week.

Stock in TUI AG

TUI, -3.82%

 closed down 2.6% following a Tuesday terrorist attack at the Istanbul Atatürk Airport in Turkey left at least 41 people dead. But shares of British Airways parent International Consolidated Airlines PLC

IAG, +0.59%

 managed to swing higher, ending up 2.8%.

Dixons Carphone PLC shares

DC., -1.93%

 fell 1.9% after the electronics retailer posted lower full-year pretax profit because of merger costs and other expenses. It did, however, raise its dividend.

Paddy Power Betfair PLC

PPB, -0.50%

 was the third FTSE 100 component that fell Wednesday, slipping 0.5%.

Sterling: The pound

GBPUSD, +0.9368%

 also climbed Wednesday, buying $1.3506, up from $1.3341 late Tuesday in New York. Sterling this week was pushed to a fresh 31-year low. Read:Here’s how the weak pound could wreck the U.K.’s economy

Source: Market Watch Personal Finance

Anemic startup recovery puts pressure on U.S. economy, Senate hearing finds


Source: Market Watch Personal Finance

WASHINGTON — A lackluster recovery for start-up firms from the Great Recession has put a strain on an already-fragile U.S. economy, threatening the job market and productivity, and contributing to greater income inequality, according to a Senate hearing Wednesday.

Facing a dwindling entrepreneurship landscape, incubators and research group leaders urged lawmakers to help startups get more access to capital, ease regulatory barriers, reform immigration policies and get rid of unnecessary occupational licensing.

The 30-year “startup deficit” — the decline of new companies share as a percentage of all firms and the workforce employed — feed into a lack of economic dynamism in a record low interest-rate environment.

The financial crisis beginning in 2008 took a toll on startups that has lingered even as the economy recovery slowly advances. Unlike dynamic recoveries following the 1991 and 2001 recessions, the U.S. only added 166,500 new enterprises between 2010 and 2014. That’s a nearly 60% decrease from the previous two recoveries, according to Economic Innovation Group, a Washington-based economic research and advocacy organization.

Energy Innovation Group research shows a startup environment suffering from less access to capital, decreased housing wealth and growing student debt among millennials in their 20s and early 30s.

Policymakers have “the duty to assure entrepreneurs across the country access to the recourses necessary to start and grow their businesses free from unnecessary impediments from the government including overregulation,” Sen. David Vitter, a Louisiana Republican who is chairman of the Senate Small Business and Entrepreneurship Committee, said during the Wednesday meeting.

Underperformance in the startup sector hurts productivity, with each hour worked producing less than what should be reasonably expected, according to John Lettieri, co-founder of Economic Innovation Group. This low productivity, as Federal Reserve Chairwoman Janet Yellen said last week on the Capitol Hill, could hamper future wage growth.

Source: Market Watch Personal Finance

Apple’s stock extends bounce, but lags broader market gains


Source: Market Watch Personal Finance

Apple Inc.’s stock

AAPL, +0.67%

is rallying 0.8% in midday trade Wednesday, to extend the 1.7% surge in the previous session, but is lagging the post-Brexit bounce in the broad stock market. The technology behemoth’s stock has now climbed 2.5% since Monday, while the Dow Jones Industrial Average

DJIA, +1.27%

has climbed 2.9%, the S&P 500

SPX, +1.37%

has run up 3.3% and the Nasdaq Composite

COMP, +1.54%

surged 3.9%. But underperforming on the way back up is the price investors should be surprised to pay, when a stock outperforms on the way down. In the two sessions post Brexit, Apple’s stock had dropped 4.2%, while the Dow slumped 4.8%, the S&P 500 shed 5.3% and the Nasdaq Composite slid 6.4%.

Source: Market Watch Personal Finance

Investors are suffering from the ‘terrible twos’


Source: Market Watch Personal Finance

It has been a long time since my kids were two years old. While my wife and I look back at those days with a smile, we also recall that children around that age can sometimes be difficult … that is when they are not being impossible. For many investors, the two years since mid June 2014 have also been somewhere between difficult and impossible. There are good reasons for that. A malaise has gradually crept in, turning several prominent investment strategies into mush. That’s not to say that folks are being wiped out, but that they are more likely treading water. Let’s quickly review what’s happened and then prescribe a short list of observations to see if we can tilt the next couple of years more in our favor.

The chart above shows that a wide variety of “set it and forget it” strategies have been mediocre producers for the past two years. The four S&P Target Risk Indexes, which are combinations of global stocks and bonds designed to track “balanced” portfolio investing, have all produced cumulative losses of between 0.91% and 2.85%. So whether you were 80% in stocks and 20% in bonds (“Aggressive”), 30% in stocks and 70% in bonds (“Conservative”) or anywhere in between, your portfolio produced a slightly negative return.

I added a couple of additional indexes to the chart to help explain why. The NYSE (New York Stock Exchange Composite) Index produced a negative return, which implies that investing outside the tech/biotech-oriented Nasdaq has, in general, been a challenge. This is even clearer when you see that the Dow Jones World Index, which includes the U.S. market, is down over 7% during this time.

These are just indexes, and there are many ways to allocate assets. But what this tells us is that attempts to “diversify” along traditional paths have been pretty futile for a while. This is certainly better than seeing major losses in your portfolio, but it raises the question that if this continues or gets worse, what can investors do differently.

I think that the mistake many investors are making is to continue to believe that what worked during much of the past 20 years will continue to work going forward. Simply “spreading out” your money to U.S. and non-U.S. stocks, and U.S. and non-U.S. bonds worked when interest rates were high but falling, and when stock markets were driven by investors and not central banks. The goals investors have (retirement, etc.) have not really changed, but the toolbox they need to target those goals must change, and quickly.

Here is my short list of things to think about in evolving your approach to portfolio management to the realities of 2016 and beyond:

The past two years have gradually turned a bull market into one transitioning toward an eventual bear market. I believe that’s the case, and you might as well. But it is nothing to cry about. That’s for two-year-olds. Instead, start recognizing that times have already changed, and that today’s market has already given us a good heads-up about what can tip the odds in your favor going forward.

What’s your risk number? My firm has made available to Marketwatch.com readers the Riskalyze risk tolerance quiz. It takes about two-minutes to complete, and by doing so you can estimate your “investment comfort zone” for short-term market volatility. You will also be added to Sungarden’s research distribution (email) list. You can go here to take the quiz.

Source: Market Watch Personal Finance