Brexit, Shmeg-xit. In case you didn't hear the British public, through a referendum narrowly voted to have the UK leave the EU. Let's call this what it actually was, a complete abdication of leadership. The UK elected officials should be ashamed for putting an issue this important before the public that didn't fully understand the damage or ramifications of their vote. However they will soon enough if they follow and actually leave. The first tremors were felt immediately by companies in the finance sector stating they would be moving jobs from London to a new Euro-zone address. Initial estimates top 100,000 job looses for London alone.

Back to the good old US of A. Immigration was a hot topic that helped sway the UK vote. It is also a hot button here in the US with Trump vowing to build the next Great Wall. Such follie. We've all helped build and have been beneficiaries of living in the greatest country on earth. Literally, people are dying to live here. The next not so big secret on immigrants, we need them. Our social safety nets, being Social Security and Medicare are stretched. Far too many baby boomers are retiring and there will not be enough workers to support these growing throngs. We have a few options. 1. Increase taxes. 2. Cut Benefits. 3. Increase efficiencies. 4. Increase the workforce. We'll get back to this for now let's check on how things are going for what amounts to be the best house in a bad neighborhood, the US economy. The figures please!

GDP. 1st quarter GDP final numbers came in at +1.1% up from its initial reading of +.5%. Growth in the first quarter was constrained by a strong US dollar and an easing in global demand for US exports. Output was also slowed by US companies working off excess inventories. Fed Chair Yellen recently pointed to data suggesting "a noticeable step up" in GDP growth for the 2nd quarter.  The Atlanta Fed is currently modeling growth at +2.6% while private economists point to growth topping 3%. A nice improvement but still good not great.

Leading economic Indicators-LEI. LEI dipped -.2% in May after April's +.6% bump  the drap in the headline figure was due primarily to a snap up in the initial weekly unemployment claims which were subsequently reversed the following week. The trending LEI still point to continued moderate growth for the coming quarter.

Housing. Existing home sales leaped +1.8% to a 5.53 million annualized run rate. The best in 9 years. The median price also jumped +4.7% to $239,700.00. Sales may have been restrained due to tight inventory levels of homes for sales. A harbinger of the health of housing was the tick up in Building Permits to +.7% on the month and +10.1% year over year.

Institute for Supply Management Manufacturing-ISMM. ISMM continued its recovery at +1.9% to +53.2% up from  May's +51.3. There was
strength across the board. The New Orders Index increased +1.3% to +57%. Production was up +2.1% to +54.7%.   Importantly, the
Employment Index inched back into expansion territory up +1.2% to +50.4%. All in all a nice rebound in the manufacturing sector.

Weekly Unemployment Claims-WUC. WUC increased +10,000 to 268,000. This real time indicator of the jobs market continues to point to
solid growth and counter to May's dismal Non-Farm Payroll figure of +38,000. Thus we look for a a snap back toward the consensus of
+180,000 for next payroll figures to be released this upcoming Friday.

Where we are going:

The US economy continues to improve albeit at a glacial pace. We seem stuck in a perennial +2 1/4% -+2 3/4% range growth rate. The drags
domestically appear to be dissipating. The effects of the collapse in energy prices seems to largely be behind us as oil finds a new home in
the $42.00-$50.00 range. The major cuts to headcounts too appear to be in the rear view mirror. Recently we've learned of sizable investments in new projects from four major oil producers. This suggests they have adjusted costs to the new price environment and can now be profitable even at these "depressed" levels. Yet another cloud has lifted over consumers. Consumer incomes are finally experiencing a liftoff. With consumer consumption accounting for over 70% of US GDP this is great news. Aside from potentially allowing for elevating the overall quality of life for Americans it also results in more robust retail sales. This pick up  should lead to increased corporate profitability, demand for headcount additions which increases our
workforce providing companies with yet even more consumers for their products. Thus the virtuous cycle is now completed.

The fly in the cocktail continues to be externally hatched. First it was Greece. Followed by a slowing Chinese economy. Then by an economically growth challenged Euro-zone. Now we have to deal with the Brexit. Each of these emergencies caused their own tsunami. There was plenty of anxiety and fear levels exploded higher. Then, when calmer heads emerged we worked our way through and trudged to higher levels. No one knows how a UK exit will eventually work out or even if the UK will follow through. We do know the process will take at least two years. Two years is a long time for adjustments to be made, economies to heal and stimulative fiscal policies to be enacted. Expect all three.

Domestically politics have unfortunately slipped down into the gutter. From the "Bombastic Trump" to "Lying Hillary" we can expect it to stay there.  Immigration will remain front and center. Immigration and social safety nets should be seen as step-children. Related, just not by blood.

Corporate America is finding it difficult to find the skilled workforce necessary to expand. The US allows foreigners  to access and graduate from some of our best schools. Then, we not so graciously ask them to leave. That is unless they apply under the EB5 program and have $500,000.00. Bottom line, we need more workers. We have access to hundreds of thousands we've gone to the trouble of educating and training, it just seems silly to expel them hamstringing our economic potential and tax base.

I have no doubts the mudslinging will continue and the Brexit fears will abound to distract, all the while as business and life in the US continues to make modest incremental gains which should nudge equity prices higher over time.  I'd like to propose a new US holiday, this coming Friday should be "Hug an Immigrant Day". Without them we don't survive and thrive. Actually we don't even exist in this great country without them. So, basically come Friday just turn to a loved one and give 'em a hug. Unless of course you're Native American in which case you probably can't even believe we're ever bringing up this topic and wonder why they didn't think of building a Great Wall 541 years ago.

For now we remain cautiously optimistic and aggressively exposed to the markets while looking for any new signals to adjust strategy. We thank you for your patience in this very challenging investing environment.

Yours in pursuit of the KWAN.
James Byrne