Within a month after the Brexit vote, global markets have shaken off the initial damage inflicted by the “remain” outcome, and resumed an upward trajectory. Most markets ended the month higher than they were just before the vote. We fear that this is more to do with the commitments made by the world’s central bankers to support any post Brexit economic slow-down, than investment fundamentals.
An interesting observation is the continued strength in the performance of emerging markets in July. The MSCI World Emerging Markets Index delivered a return of 4% in June, and another 5% in July. Supporting this rally has been another step up in the recovery of commodity prices. Notwithstanding the received wisdom that commodity prices require a resurgent Chinese economy to recover, the platinum price is now up close to 30% thus far in 2016. Furthermore, the “remain” vote, which led to central banks committing to support their respective economies with liquidity, has emboldened investors to take on more risk, resulting in an increased appetite for emerging market assets.