Central banks around the world, struggling with slow economic growth, continue to support easy monetary policy.  Trillions of dollars of government debt now trade with negative interest rates in many parts of the world.  In the United States, the Federal Reserve raised rates for the first time in many years last December.  They indicated further rate increases were on the way, but sluggish economic data since then has kept them on hold.  It seems apparent that rate increases will only occur when the economic data supports it.

After a significant initial drop in the two days following the Brexit vote, the U.S. stock market has recovered most of the loss.  However, the bond market is still digesting the uncertainty that now surrounds the U.K. and the European economy overall.

As long as central banks around the world continue with policies supporting historically low interest rates, we continue to believe equity markets are the best place to invest.  As we have stated repeatedly over the past several years, company managements are focused on increasing shareholder value through increased dividends and stock buyback plans.  We continue to concentrate on companies with strong balance sheets and a proven ability to manage through uncertain times. We believe that these are the companies that will lead the market over the next few years.
We are monitoring the developments in the United Kingdom as it continues to be a very fluid situation.  After a significant initial drop in the two days following the Brexit vote, the U.S. stock market has recovered most of the loss.  However, the bond market is still digesting the uncertainty that now surrounds the U.K. and the European economy overall.  The U.S. bond market has rallied over the past week as investors have sold British Pounds to invest in the relative safety of the U.S. Treasury market.  With the information we have at this time, it is still our view to stay the course with a portfolio consisting of high quality stocks as well as shorter-term bonds in our balanced accounts.  We will continue to monitor the situation in Europe to see if it looks likely that other countries will follow the U.K.’s lead.  In that scenario, we would need to consider lowering our allocation to stocks, but do not see that as likely at this time.