Investing in a Post-Brexit World

In our 2Q 2016 Letter to Investors we examine the impact of the UK's vote to leave the European Union and what it means for financial markets going forward. In summary, we argue that Brexit, in itself, is unlikely to have a meaningful impact on the global economy. However, the immediate and severe sell-off in markets over the two trading days following the UK's referendum laid bare the fragility of the global economy and the latent risks in financial markets. We are in the midst of an ongoing and dramatic decoupling between worsening economic fundamentals and the elevated prices of financial assets. We contend that investors relying on the "traditional" portfolio of developed market bonds and equities, particularly US equities, are likely to experience disappointing long-term returns.