“May you live in interesting times.”
Chinese proverb.

The world awoke this morning to the results of the referendum in the U.K. where contrary to most of the
polls and prognosticators voters chose to leave the European Union voting in favor of Brexit with
approximately 52% voting to leave vs. 48% voting to remain. The results of the vote reverberated through
Asian and European markets and today in the U.S. global equity indices continued to experience downside
pressure. The vote for Britain to leave the EU has also impacted currencies around the globe with both the
British Pound and the Euro suffering declines while the Japanese Yen and the U.S. Dollar have increased
in value.

Although markets have not reacted well to this event it doesn’t appear that the Brexit vote is another
Lehman-like moment for the global capital markets. The market volatility index (VIX) did spike higher on
the Brexit news and it is currently hovering around the low to mid 20’s range. However, for the sake of
comparison, during the Lehman Brothers crisis in 2008 the VIX reached into the high 80’s.
Our team has been through many similar periods of market dislocation over the years, and this is not new
to us. Our investment goal is to generate positive investment returns while simultaneously managing
portfolio risk particularly from negative global shocks such as the Brexit vote. We seek to do this primarily
through broad global portfolio diversification. Although our current equity holdings have been negatively
affected by the market downturn, our positions in gold and fixed income, as well as our current cash
positions are all helping to somewhat offset declines in our equities.

Our investment committee remains vigilant and prepared to act if the current market downturn should
become more pronounced. We have no qualms about taking risk off the table by raising additional cash if
such a course of action becomes appropriate. However, it is also true that oftentimes during periods of
market dislocation the best course of action may be to not make any changes to one’s investment portfolio.
We will continue to closely monitor the markets going forward and are prepared to take action if we believe
such a move makes sense.

DeFred G Folts III
Chief Investment Strategist

DISCLOSURES: All information presented in this commentary is the opinion of 3EDGE Asset Management, LP (“3EDGE”). This article is not intended to provide personal investment advice and does not take into account the unique investment objectives and financial situation of the reader. Investors should only seek investment advice from their individual financial adviser. Information provided in this article includes information from sources 3EDGE believes to be reliable, but the accuracy of such information cannot be guaranteed. Investments in securities, including common stocks and ETFs, involve the risk of loss that investors should be prepared to bear. Past performance may not be indicative of future results.

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