Stay Cautious on Europe Despite Post-Brexit Rebound

Although it is encouraging that global equities recovered forcefully following the surprise vote for UK to exit the E.U., Brexit risks aren't over for European markets, said Zack Apoian, senior asset allocation strategist at Morgan Stanley (MS) - Get Report Wealth Management. 'Despite the pause in news flow, volatility is likely to result from uncertainty surrounding the timing of invoking Article 50, posturing during the negotiation process, and the potential for other countries to move toward exit,' said Apoian. Constrained profitability also poses a concern in his view. Even though Europe has grown, companies have had difficulty executing and allowing this to translate to profit. Return on equity (ROE) is roughly seven percent across Europe and the UK versus 11 percent in the United States. Apoian said the tenuous state of Europe's banks also poses a risk to returns.