After last week's Federal Open Market Committee (FOMC) meeting, in which the Fed lowered its longer-term expectation for interest rates, we now await the upcoming vote in the U.K. on Brexit. My expectation is that remaining in the European Union (EU) camp will prevail due to late deciders choosing the conservative path to stay in the EU. The vote may end up very close, which continues a global trend of more volatile non-establishment politics across the globe. This trend is not favorable to asset returns in the near term.
Last week's Fed decision and statement was not a surprise but instead reinforced that interest rates would remain lower for longer. Despite this, Fed policy makers will likely raise rates at the July meeting by 25 basis points as long as the June employment numbers return to a more normal level with job gains in excess of 150,000.
Keep an eye on developments in China, as economic growth may be slowing after a rebound in the first quarter.
Continue to remain defensive as risk markets most likely will remain range-bound in this market.
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