It wasn't supposed to happen. After the British surprise vote to exit the European Union caught global investors leaning the wrong way last week, most traders expected a blood bath.

Instead, after a two-day 5 percent sell-off, markets have regained almost 90 percent of that loss in the last few days. So how could the "smart money" get it so wrong twice in one week?

Readers may recall that traders had at first bid the stock market higher in anticipation that the UK would remain in the EU. When that didn't happen, traders flipped the other way by selling and shorting. Most of the world markets were down by 5 percent or more between last Friday and Tuesday.

And then a funny thing happened. Markets worldwide started to rebound despite dire predictions that fallout from the Brexit vote would crater the economies of Europe, impact the U.S. economy, and generally create worldwide havoc. You can credit the central banks of the world for the turnaround in the markets, not that they did anything special. They simply stated that they stood ready to defend world markets, if necessary, from anything that might appear to be unorderly. That’s all that was required.

Traders took that reassurance to mean (like it has in the past) that even more money would be poured into financial assets in the near future. Global bonds rallied as interest rates plummeted. Commodities soared and so did stocks. Over the last three days there was a worldwide dash to buy back financial assets of all kinds. Thursday night, as expected, the Governor of the Bank of England Mark Carney said British investors could see further stimulus this summer.

That sent the UK stock market (the FTSE 100) to a 10-month high leaving British stocks up 2.8 percent since Brexit. The British pound, on the other hand, has plummeted 8.5 percent during that same time period, which will be good for UK exports in the months ahead.

As the fireworks subside and the smoke clears, we find ourselves just about where we were before the whole Brexit thing started. The S&P 500 Index and the Dow are up 3 percent for the year, NASDAQ, the weak sister, is making up its losses and the world looks wonderful as we head into a three-day weekend.

Of course, you may wonder why gold, a traditional safe-haven commodity, is climbing, even though Brexit fears appear to be a thing of the past. So too are U.S. Treasury bond prices, also a safe-haven in times of uncertainty. Does this mean, as many think, that the world is in a mess and investors are simply whistling past the graveyard?

Well, yes and no. Gold and other commodities are running because more and more investors are convinced that this entire central bank stimulus is making the world’s currencies less and less viable. There will come a day, so the bears say, when we will all pay a high price either in inflation or another financial crisis for all this central bank largesse.

Then, too, as more and more global bonds pay negative interest rates, thanks to these same central banks, investors are chasing the highest rates of returns they can find. U.S. Treasury bonds, after inflation, are returning you nothing in interest payments, but foreign investors are buying them hand over fist because they still offer more than their own bond markets do.

As rates fall, dividend yielding stocks, such as utility and telecom companies, which pay large dividends, are making new highs, despite the fact that these stocks are becoming more and more expensive.  What used to be safe and defensive has now become aggressive and risky.

As central banks continue to experiment with our financial futures in this brave new world, the stock market continues to climb until it doesn't. Where it all ends, no one knows. Have a happy Fourth of July.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

Have you noticed that you are buying more products via the internet? Do you find yourself showroom shopping when you do make the trip to that department store or mall? It is happening to all of us and as it does, the traditional brick-and-mortar retailers are feeling the loss.

That doesn’t mean the demise of malls or department stores altogether, but over the next decade there will be fewer of them, especially in depressed areas of the country. The main culprit in this story is e-commerce or internet shopping. In the first quarter of this year, e-commerce accounted for $74.9 billion. That might sound like a lot of money but it still only accounts for 7 percent of overall consumer spending in this country.

Still, online shopping has taken market share every year since it began and is growing at roughly 8 percent per year. Its main attractions are convenience, lower prices and increasingly, free shipping. Clearly, without the overhead costs of physical storefronts, e-commerce companies such as Amazon can undercut traditional retailers at every turn. As more and more internet retailers develop huge logistics networks around the country, it will become both easier and cheaper to ship to their customers.

Wall Street analysts are quick to predict the demise of malls, shopping centers and department stores. They estimate that the brick-and-mortar crowd will need to close as many as 20 percent of their stores nationwide in the future. Weaker retailers (like Sears and J.C. Penny) will bear the brunt of shuttered shops.

Although traditional retailers are fighting back with their own e-commerce efforts, they find that when they close a storefront, what e-commerce traffic they had before the closing also declines. That generates a double whammy to their bottom lines. Despite that fact, most brick-and-mortar retailers are forging ahead in establishing their own e-commerce businesses.

In addition, they are establishing "loyalty programs," which reward the shopper by discounting merchandise. They are also issuing their own credit cards with various bonus schemes attached to how much you purchase on those cards. You may have also noticed that in certain stores there are more and more interactive or digital displays for comparison shopping on the spot. Other stores have developed entertainment for the kids while the parents shop as well as eateries and other efforts to enhance the experience of your shopping trip.

So don't play taps for traditional retailers just yet. There are also some things an online website just can't replicate. You can't, for example, touch and feel a product before buying it on the internet. That doesn’t stop someone like me from checking out the product and price in the store and then buying it on the internet anyway. That's called the "showroom effect." In my own case, however, if the store has a knowledgeable and professional staff, depending on the product, chances are that I will buy it in the store anyway.

Higher-end retail stores and malls will continue to thrive, in my opinion, as they meet the challenge of the internet. Just check out your neighborhood Apple emporium to get a taste of what the future brick-and-mortar stores will look and feel like. The experience will be worth the trip for many. And let’s not forget the social aspects of shopping, at least for those of the Baby Boomer generation. One elderly client I recently talked with admitted that he loves shopping and enjoys wandering the aisles checking out new and varied products.

I imagine that there are people of all ages that still "hang out at the mall" or just visit the brick-and-mortar storefronts for a day of shopping; but the younger you are, the less likely that you will want to spend time doing that.

In summary, there is still going to be room for both clicks and bricks kind of shopping in the future. At least until the likes of Amazon can somehow bring virtual reality shopping into our living rooms. Don't laugh; I wouldn't put it past them to be working on something like that right now.
 

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.