Wait and See Tomorrow’s Results of the ‘Brexit’ Vote

There are few market data points that don’t get priced in prior to the data release. Generally when released, both sides of the trade are left to reconcile the grey of who is more right.

With the “Brexit” vote tomorrow to let people in the United Kingdom decide whether to leave the European Union (EU), the decision comes down to a clear “yes or no.”  The market is clearly pricing in a “remain in the EU” outcome, but the polling numbers are a coin toss.

There is no edge in trading ahead of the historic vote by the British people about whether to leave the EU, so let’s not try and handicap the results. A stay vote will be market positive and bond and gold negative, while a leave vote most likely will be dollar positive, bond positive and stock negative.

As mentioned earlier, the market already has seemed to price in a vote for the United Kingdom to remain in the European Union. So, if this result happens, then perhaps it will have a diminished market effect and even buy-the-rumor-sell-the-news type tinge.

However, given this early posture, should the British vote to leave the EU, then look out below as domestic U.S. markets in particular have not prepared for this outcome. To sum it all up, there are too many variables and too many potential market reactions, so let’s wait it out and stay nimble.

Our current positioning would generally benefit from some volatility as stocks are still stuck in a trading range, with oil remaining in a trading range, too, but with wide daily swings. However, even with prices in a range, we still picked up some income with our SPY call spread and continue to let that decay away.

While the Brexit decision remains too close to call, one thing is certain and that is market volatility, regardless of the vote. So be ready for potential special alerts at the end of this week.