There is no doubt that the result of the Brexit vote is negative for global economic activity. Global growth had already been slow before the referendum—and business confidence has only deteriorated in its aftermath. And yet, in many ways, the figurative song remains the same for investors, who awoke on June 24 to find a world in which interest rates were plunging, global policy was poised to become even more accommodative, and risk assets like equities and credit were trading at attractive valuations compared to other assets like cash and bonds.

Given the monetary-policy backdrop, we expect the current cycle to continue and markets have room to run. However, greater market volatility is to be expected, the typical drawdowns may be more severe, and asset returns may be tempered.

We favor U.S.-dollar denominated assets over UK and European equities and credit, and we believe that the ultimate winners in all of this uncertainty may be emerging markets, which now have cover to pursue the counter-cyclical monetary and fiscal policies needed to restore growth following a prolonged slump across much of the emerging world’s 27 economies.

We highlight some things long-term investors can consider in our mid-year outlook for a post-Brexit world.

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