KKR's McVey Explains the 'New Reality' in Global Markets (video)

KKR's McVey Explains the 'New Reality' for Markets

Video above published Feb 6, 2017: Henry McVey, head of global macro and asset allocation at KKR, outlines the shifts he sees creating a "new reality" in global markets and explains the firm's investment strategy for the year ahead. He speaks with Bloomberg's Erik Schatzker on "Bloomberg Daybreak: Americas."

• Shift from monetary to fiscal;
• Moving from global agendas to domestic;
• Moving from re-regulation to deregulation;
• Moving towards volatility in interest rate markets, then equities;
• Reflationary environment.

Many are expecting an interest rate increase when the Federal Reserve FOMC meets this week March 14-15.

Index investors have done well since right after the Brexit vote last year--gains since June 24, 2016-- on major U.S. and European indexes:

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Brexit Impact On Tech Startups, Business & Global Economy (videos)

London Stock Exchange benchmark index FTSE 100, market close Friday, July 8, 2016:

London Stock Exchange benchmark index FTSE100 UP 4% since Brexit Vote (source: google.com)

Chart above: London Stock Exchange benchmark index FTSE100 Friday, July 8, 2016, UP 4% since Brexit Vote on June 23, 2016, while Germany's DAX and France's CAC40 are still DOWN (see charts at bottom of this post below).

Managing partner at GGV Capital (domain: ggvc.com) Glenn Solomon weighs in on Brexit's short term impact and what's moving in the tech industry, specifically startups. Published by CNBC.com July 8, 2016

See also: This Is What Brexit Means For You And Your Startup | Mattermark.com: "Given the volume of noise, I have some advice for the founders, engineers, retirees, marketers, and cab drivers on what they should do: Nothing. ... What should startup founders do? Focus on hiring great people, closing more deals, and making their customers happy. The rest is noise. When you get to the size of Oracle or IBM, growing at the global GDP rate—or worse—you can worry about shifting macro trends."

IMF's Christine Lagarde on Brexit uncertainty:

Shawn Donnan talks to the IMF.org's Managing Director, Christine Lagarde, about Brexit and how global growth has been impacted following the UK's referendum to leave the EU. Published by FT.com July 7, 2016.

See also: Heard in the Hutong: Beijingers on Brexit - China Real Time Report | WSJ.com: Do you think the European Union will become weaker if Britain leaves? Do you think Britain will be better off on its own? "The EU will become weaker. For the U.K., as I said before, it’s hard to tell..." Do you see any consequences for China of this? "No."

Since Brexit vote on June 23, 2016, 3 other nation's benchmarks (see chart below):

• Germany's DAX Down 6%
• France's CAC40 Down 6%
• USA's S&P500 Up 1%

Top to bottom: DAX, CAC40, and S&P500 (source: google.com)

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Brexit Postscript: FTSE100 Roars, Theresa May, Sword in Hand, Next PM?

British Major Jack Churchill (far right) leads Commandos, sword in hand (World War II photo - public domain)

Enjoy your weekend! Here's a review, with links, to follow-up Domain Mondo's posts on Brexit:

•  After ‘Brexecution,’ the man who betrayed Boris Johnson speaks out | WashingtonPost.com: "A day after staging a political ambush that reshaped the race to be Britain’s next prime minister, Michael Gove said Friday he acted out of “conviction, not ambition”... [Theresa] May [now favored to win] would be the second female prime minister in British history, after Margaret Thatcher. May’s unsmiling public persona and hard-line conservative politics have drawn occasional comparisons to the Iron Lady ..."  

Theresa May may be exactly the right person to lead the UK, with nerves, and persona, made of steel. She has already said the UK will leave the EU, but on terms, and timing, the UK chooses, not the EU.

UPDATE July 7, 2016: Theresa May and Andrea Leadsom to vie for Iron Lady’s Mantle as ‘Hard as Nails’ U.K. Prime Minister--read more at Bloomberg.com and London Property Market: Massive Undersupply, Cheap Pound, Uncertainty | DomainMondo.com.

•  There Will Be No Early General Election | washingtonsblog.com: "The new PM [UK Prime Minister] will have 3.5 years in Downing Street with a working Commons majority. As I predicted, the temperature of debate in the Tory party has cooled almost completely. Their leadership contest is genteel. People who were accusing each other of outright lies and appalling behaviour just one week ago, are now all chummy together again. The Tories care about power above all else. They have it and won’t risk it."

• Eric Schmidt on Brexit: 'Unlikely' to Hurt Google's British Operations | Fortune.com: "Though he said he doesn’t understand the reason for the vote ..." Really? Maybe Eric Schmidt should read: Brexit Is Only the Latest Proof of the Insularity and Failure of Western Establishment Institutions | TheIntercept.com by Glen Greenwald: "The decision by U.K. voters to leave the EU is such a glaring repudiation of the wisdom and relevance of elite political and media institutions that — for once — their failures have become a prominent part of the storyline. Media reaction to the Brexit vote falls into two general categories: (1) earnest, candid attempts to understand what motivated voters to make this choice ... and (2) petulant, self-serving, simple-minded attacks on disobedient pro-Leave voters for being primitive, xenophobic bigots (and stupid to boot), all to evade any reckoning with their own responsibility ... these  institutions have spawned pervasive misery and inequality, only to spew condescending scorn at their victims when they object ..."

British lion and Union flag - Attribution via Wikimedia Commons (CC BY 2.0)
[Jonund, tracy, Stefano Brivio (buggolo), sculptor of lion: W. F. Woodlington]

London Stock Exchange benchmark FTSE100 comes 'roaring' back, hits 2016 high, and has its biggest weekly rise since 2011; up 3.78% since Brexit vote on June 23. Germany's DAX and France's CAC40 are still "in the red" post-Brexit vote:

Top to bottom: FTSE100 (UK); DAX (Germany); CAC40 (France) - source: google.com

•  Brexit Bargains Beckon: Hunting Ground For Brexit Bargains | SeekingAlpha.com: "... In the history of value investing, the greats have consistently followed one rule: Never let a good crisis go to waste ... it is the opportune time to identify cheap businesses in certain industries that are unjustifiably beaten down or sold off together with peers. In order to screen for high-quality companies and seeking to capitalize on the panic surrounding Brexit ..."

•  Is Brexit the End of the EU? | MauldinEconomics.com: "The EU, Not Britain, Is the Weaker Player. The UK is Germany’s third-largest export market. It is the fifth-largest for France and Italy ... Europe cannot afford a trade war even if it feels insulted ... Britain’s banks channel global capital and are a huge source of investment for the Continent ... it is the clients who will determine the world’s banking hubs. London has been a traditional banking center preferred by foreign clients. New York—not Frankfurt—is the alternative to London. If clients had wanted to bank in Frankfurt, they would have already done so ..."

•  UPDATE: Backwards Brexit doomsayers: usatoday.com: "... The alarmists have everything exactly backward. It is the EU that is under threat of dissolution, and it is the EU’s strongest member, Germany, that would be most vulnerable were trade relations to deteriorate ..."

•  Beware the Man With the World's Reserve Currency--It was the U.S. Federal Reserve, not the ECB, that issued trillions of dollars in credit and swap lines to the major European banks in 2008--Brexit, the E.U. and the "Special Relationship" | charleshughsmith.blogspot.com: "... The U.S. has a core interest in preserving British autonomy, but it also has a core interest in helping the European Union solve its many problems. The U.S. is not choosing between the U.K. and the E.U., except if it is forced to on specific issues by extremists in the E.U. Any clique in the E.U. that thinks the U.S. will sit idly by while they "punish" the U.K. had better recalibrate their core interests and the potential for blowback ..."

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Day After Brexit Vote Eurocrats Lost, Market Recovery, Path Forward

UPDATE June 30, 2016: London Stock Exchange benchmark FTSE100 still rocketing UP:

UPDATE June 29, 2016: Contrary to the "Chicken Little" reports from the media and establishment, the FTSE100, the benchmark index of the 100 largest companies listed on the London Stock Exchange (as measured by market capitalization) has completely recovered and is now higher than before the Brexit vote:

The London Stock Exchange FTSE100 Comes Roaring Back (source: google.com)

UPDATE June 26, 2016: Contrary to media reports following the Brexit vote, Reuters reports polling indicates Scots do not favor another referendum on separating from the UK. See also News Review: Brexit ... | DomainMondo.com (June 26, 2016):

"There is a lot more to come in this drama beyond just the voting results. It is now clear that Boris Johnson and David Cameron are "on the same page" and there will be no immediate trigger of Article 50. Instead, the clever British intend to use the leverage of their voter mandate to squeeze the EU aristocracy for concessions that will give the UK almost everything it wants, and a status no other country, in or out of the EU, now has."

Brexit does not make UK 'less European' says Boris Johnson:

Video above: Boris Johnson said Friday the UK vote to leave the EU gives Britons a 'glorious opportunity' to take control over its own taxes and borders. All UK politicians 'should thank British people' who 'did their job' dealing with one of the toughest questions of all time. The EU "was a noble idea for its time; it is no longer right for this country" said Johnson. Published June 24, 2016.

Brexit fallout? Britain will be fine, but the EU may have reason to worry: 

Ignore the noise, distraction, and hysterics of headlines and cable news. Here's a snapshot of what really happened the day after the Brexit vote:

Below is an email sent Friday (June 24, 2016) by the CEO of a major global company headquartered in London to all employees following the EU referendum vote in the UK on Thursday to withdraw from the European Union:

Dear Colleagues, I am writing to share some immediate thoughts in the light of the UK’s vote to leave the European Union. These are clearly uncertain times for the UK and for Europe. _____’s view throughout the campaign was that the UK was better off within the EU. Of course we fully respect the democratic decision that has been taken and, for _____, we will now focus on forging a successful path in a new context. _____ is in a strong position. More than half of our revenues are from the US, in dollars. We have a solid balance sheet with low debt, and this will enable us to weather uncertainties. Although we care deeply about the UK, we are the world’s _____ company. We will continue to be advocates for a world that is more open and connected. It is vital that the UK’s world class universities should continue to attract the brightest young people from around the world to enrich our _____ community. For now, the important thing for us all is to stay focused on our business and our customers. We will take our time and work through every implication of our business and our growth. We will also will play our part in helping maintain the outward-looking United Kingdom and globally connected _____ community that are in the interests of us all. (emphasis added)

Markets' reactions (from Thursday close to Friday close--see charts below):
FTSE100 (UK): -2.71%
SP500 (US): -3.58%
DAX (Germany): -6.69%
CAC40 (France): -7.85%

Clockwise: Benchmark Stock Market Indexes for UK (FTSE100), France (CAC40), Germany (DAX) and US (S&P500)
Week of June 20-24, 2016 (source: google.com)

Clearly, the French and German markets took a much harder tumble, while the markets in London showed resilience and recovery by the end of the market close on Friday. Investors have reason to worry about the European Union (EU). The EU has a lot of problems that will only be worse without the UK--problems that are not going to go away--long-term economic decline, aging populations, fiscal and monetary issues and economic imbalances caused by the single currency (euro), and a continuing refugee crisis. Is it any wonder that Switzerland formally withdrew its long-dormant application to become a member of the EU last week? Haughty Eurocrats may regret their undermining David Cameron's campaign to "Remain."

Much is yet to be done, and as economist Martin Wolf says in the video below, Britain, the world's 5th biggest economy, is the most important market for the Eurozone. As for Wolf's reference to the "consequences of uncertainty," remember what Warren Buffett says:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful.”

Note accordingly, Martin Wolf's reference to investors snatching up assets in the UK:

Video above published by FT.com on June 24, 2016 - Brexit: Economist Martin Wolf  - economic forecast | FT Comment.

See also on Domain Mondo:

• Brexit Vote Results LIVE, UK Votes to Leave EU, What Happens Next?
• Brexit: Will UK Vote to Leave or Remain in the European Union? (video)
• Brexit: EU Referendum Was A Terrible Mistake by David Cameron (video)

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