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Stock markets moves tend to take the ‘path of least resistance,’ which for most investors tends to be the ‘path of most pain’ as it is the direction where the fewest investors are positioned. That was certainly the case for the rally from the market lows in early February of this year. An overwhelming consensus of bearish opinions about the outlook had most investors sitting on the sidelines with high cash levels. Hedge funds were even more aggressive, with record short positions. The logic for that positioning was straight forward. Corporate profits were falling, valuations were the highest in a decade, the aggressive ‘zero’ then ‘negative interest-rate’ policies of the global central bankers had forced money into financial assets just as global growth was once again heading lower. In June the U.S. reported the worst hiring since September 2010. But, despite all of this, stocks continued to climb the proverbial ‘wall of worry’ that pushed the S&P500 Index closer to a record than any time since last July. That all changed on June 23rd when the good people of Great Britain completely surprised the consensus view and voted 52-48% in favour of leaving the European Economic Union (EU). (more…)