Brexit, Britain’s decision to leave the European Union has long term economic and market consequences. What are they? Franklin Mutual European Fund manager, Philippe Brugere-Trelat and leading strategist, Jason Trennert of Strategas Research Partners weigh in.
WEALTHTRACK Episode #1303; Originally Broadcast on July 8, 2016
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- Co-Portfolio Manager,
- Franklin Mutual European Fund
- Co-Founder, Chief Investment Strategist,
- Strategas Research Partners
Turmoil, volatility and uncertainty have long been considered enemies of stock markets. They certainly proved that once again in the days immediately following Brexit on June 23rd, when British voters passed a referendum to exit the European Union. For a few trading sessions investors fled stocks and other assets perceived to be risky and flocked to traditional safe havens such as gold, long-maturity U.S. Treasury bonds and debt of other countries considered to be of high credit quality, including Germany, France and Japan.
According to bond rating firm Fitch, sovereign debt with below zero yields increased by $1.3 trillion in the month of June to a total of $11.7 trillion, boosted by the Brexit vote. Longer maturity debt was particularly popular. Japan’s negative yielding debt grew about 18% to $7.9 trillion, France’s by 13% and Germany’s by 8% to over $1 trillion each.
Britain is the first country to exit the 28 country European Union, which took its current form in 1992 as a single market allowing goods, services, money and people to move freely among member states, as if it were a single country. It has its own parliament, located in Brussels, with the ability to regulate a wide range of areas including the environment, transportation, consumer rights, employment rules and even such things as mobile phone charges and electric tea kettles.
Its single currency the Euro wasn’t created until 1999. The United Kingdom opted to keep its own currency, the Pound Sterling, as did several other member countries including Denmark and Sweden.
Why did the Brexit vote set off such a firestorm in global markets? How much of a threat is it to the global economy and financial markets now?
Joining us on WEALTHTRACK this week are two market pros who have been tracking these developments closely. Philippe Brugère-Trélat, Executive Vice President of Franklin Mutual Seriesis a contrarian, value investor with years of experience investing in Europe and other international markets. He is Co-Portfolio Manager of three funds, all rated 4-star by Morningstar. He has managed Franklin Mutual European Fundsince 2004, and both Franklin Mutual Global Discovery Fund and Franklin Mutual International Fund since 2009.
Our other guest is one of our Financial Thought Leaders. Jason Trennert is Co-Founder, Managing Partner and Chief Investment Strategist atStrategas Research Partners, an independent investment strategy and macroeconomic firm celebrating its tenth anniversary this year.
Identified by Barron’s as one of “Wall Street’s Best Minds”, Trennert and his team are known for their original and timely economic, political and market analysis and identification of investment themes. The firm recently started Strategas Asset Management to enable clients to invest in portfolios based on three of those themes. One is Policy Opportunities, another is Large-Cap Dividend Growth and the third is New Sovereigns, formerly their Thrifty Fifty portfolio which we have discussed on previous episodes. I will ask Trennert for an update.
If you miss the show on television this week you can always catch it on our website. We also have an EXTRA interview with both of our guests. As always, we welcome your feedback. Click on theContact Us link on our website, or connect with us on Facebook or Twitter.
Have a great summer weekend and make the week ahead a profitable and a productive one.
THINK LIKE A CONTRARIAN AND BUY A SMALL AMOUNT OF EUROPEAN STOCKS
Jason Zweig, “The Intelligent Investor” Columnist at The Wall Street Journal recently headlined his column: “The More It Hurts, The More You Make.”
No Bookshelf titles this week.
BRUGÈRE-TRÉLAT: GLOBAL COMMUNICATIONS
- Vodafone Group PLC ADR
- Price: $29.65 on 7/7/16
- 52-week range: $27.92 – $38.43
TRENNERT: GROWTH INDUSTRY
- PowerShares Aerospace & Defense ETF (PPA)
- Price: $37.14 on 7/7/16
- 52-week range: $15.30 – $38.03
EXAMPLES OF STRATEGAS’ NEW SOVEREIGNS
- Johnson & Johnson
- Lockheed Martin
More information regarding WEALTHTRACK transcripts can be found here
[tab] Philippe Brugère-Trélat from the WEALTHTRACK Archives:
Jason Trennert from the WEALTHTRACK Archives:
BRUGERE-TRELAT: AVOIDING BURNOUT
Phillipe Brugere-Trelat has managed top performing European and international portfolios through several decades of booms, busts, financial crises, and most recently Brexit. How has he avoided burnout?
TRENNERT: POPULAR THEME PORTFOLIOS
Jason Trennert and his partners founded Strategas Research Partners ten years ago as an independent macroeconomic, investment strategy and policy firm for institutional clients. As part of that work they have identified some major investment themes and constructed model portfolios to match. Three portfolios have proved to be so popular that the firm recently created Strategas Asset Management to run them for clients.