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The 'leave' campaign, a victory for the pro-Brexit voters, was quite a surprise to markets and the world. The United Kingdom, based on a referendum of all eligible citizens, voted to leave the European Union (EU) and became the first country to do so. The effects of the referendum vote are already being felt in the political spectrum and the financial markets. However, the structural changes will take some time. Financial markets, on the other hand, have not and will not take years to digest this revolution.

Bond markets globally were off to a slow start at the beginning of the quarter, but began to drive higher as the Brexit vote approached and eventually jumped on the result as investors sought out safe-haven assets. The Barclays Universal Bond Index gained 2.53 percent in the second quarter; the gauge has advanced 5.68 percent so far this year through June. Interestingly, domestic and some international equity markets have largely recovered from their post-Brexit lows, but fixed income markets have remained at elevated levels as investors stay wary of the evolving economic landscape.

There were two distinct periods during the quarter divided by sentiment and performance. The start of the year through February 11 was a “risk-off” period of negative sentiment and sharp declines across asset classes and countries. Many assets had double-digit declines during the first half of the quarter. Sentiment shifted abruptly and most markets rallied starting February 12. Many major indices erased prior losses to post gains for the quarter.

Prior to the Brexit vote on June 23, financial markets were relatively strong. The S&P 500 index was trading just under its all-time high and the British pound was at the highest level of the year. The day after the vote, markets reacted sharply with risk-assets dropping and safe haven assets rising. Oil, the S&P 500, and the FTSE Eurotop 100 fell 5 percent, 4 percent, and 6 percent respectively. Gold gained 4 percent. The sell-off lasted two days and equities regained much of the two-day declines by month-end.

On November 8, 2016, millions of Americans will cast their votes for the next U.S. President. In considering how the new political environment in 2017 will impact the investment landscape, it’s important to keep in mind the words of legendary investor Benjamin Graham: “In the short run the market is a voting machine, but in the long run it is a weighing machine.” Graham was warning investors to avoid focusing on a single-event outcome to the exclusion of other factors.

Chief Investment Officer David Donabedian recaps the first half of 2016 and provides an outlook for economic activity and financial markets in the third quarter of the year. The issues that will have the most impact on the financial markets over the next 12 months are:

With the U.S. elections front and center in the minds of most investors around the world, we focus this edition of Global Foresight on the potential outcomes of the November 8, 2016 vote and discuss how the elections could impact the composition of the Supreme Court, legislative priorities for the next Congress and the U.S. Federal Reserve.

For eight years the Federal Reserve Bank has held interest rates abnormally low. The Fed's dual mandate of moderating unemployment and inflation seems to have morphed instead into keeping stock prices high. That has helped Wall Street tremendously but has punished the average person saving for retirement. What we need now is economic growth, and fiscal and monetary changes from Washington, D.C. to reverse the low return environment.

In this quarterly investment insights report—“The Economic Case of Dr. Jekyll and Mr. Hyde”—is an examination of the uncertainty in the financial markets. It identifies and delves into key themes for investing in the current environment. The main concerns for investors revolve around the rising U.S. dollar, monetary policy changes and the probable introduction of fiscal stimulus, and the path of earnings. Deciphering these themes will be important to investors, and only time will tell how they play out.

This webinar and presentation provides an overview of where we are today and views from the investment management industry on the impact of the election across the US, developed and emerging markets.