It was also a hot summer on the financial markets. Several themes have contributed to increasing volatility in the last two months.
First of all, the Greece. The exhausting negotiations between Greece and its creditors have been "resolved" with an agreement that provides for 86 billion in aid over the next three years and a memorandum that outlines the route to follow. Added to this were the resignation of Tsipras and the consequent new elections for 20 September 2015.
Then there is the China. Fears of a slowdown in the Asian giant's economy triggered a deep stock market correction, transmitted to the stock lists of the rest of the world, with the typical increase in correlations. Many doubts have emerged about the "Chinese model", divided between a market economy and state control.
The collapse in the prices of raw material, with its deflationary effects on the economy, continued in the summer months. Combined with the moderate economic growth in the US, it has helped to strengthen the debate on raising interest rates by the FED, imminent for several months in the imagination of the operators, but never realised. We will see if the month of September will be the good one.
I interest rates they moved relatively little. The yields on government bonds of developed countries generally recorded slight decreases, while movements of the opposite sign were recorded among the government bonds of the main emerging countries.
With stock market indices on lower values than a few months ago and bond and monetary yields still very modest, it is legitimate to ask whether it is the case to buy something on "sale" (or at least in "promotion"), changing the asset allocation, for a few months made more defensive.
First we need to evaluate the economic-financial scenario. Log in to find out more
HOW TO INVEST? BASIC SCENARIO
Various hotbeds of risk remain active: in addition to China (and Emerging Countries in general) and the expected rate hike by the FED, for the PIGS (Portugal, Ireland, Greece and Spain) an autumn-winter season of political elections; there are also other geopolitical risks in EMEA (Europe, Middle East and Africa). However, we believe the probability that these risks will manifest themselves in a serious form, at least in the immediate future, is rather low.
Furthermore, despite a deteriorating trend, equities have acceptable fundamental valuations in many areas of the globe and are looking a bit cheaper than they were at the start of the summer. Bond yields remain at historically low levels, with more upside than downside potential, while commodities remain weak overall.
ASSET ALLOCATION SUMMARY
We faced the summer turmoil on the financial markets with a conservative asset allocation and good risk diversification, which allowed us to remain relatively stable with respect to the general market trend. Now, given the scenario, we have decided to restore a slightly more aggressive structure for portfolios, favoring areas with greater potential, aware of the fact that these are purchases with a medium- or long-term perspective, and that it is likely that the market volatility remains quite high.
