Beware Greeks Rejecting Gifts

Time for another update on market movements and happenings.


Those clients that I have met face to face with recently will be aware that my general thoughts on imminent future market movements are that we are unlikely to see major upwards gains in the markets in general in the near and medium future but that during that time I expect high volatility – ie lots of ups and downs.

This is good for those saving regularly as it enables the effect of ‘pound cost averaging’ to take effect - see http://greenfinancial.blogspot.com/2011/02/pound-cost-averaging.html

However for those already invested it probably represents more of a roller coaster ride.

Do remember, that the lower risk (or volatility) portfolio content you have, the lower the exposure you have to equities and the markets, so the lesser effect any drops (or rises) have on your investments.

For those in the lower numbered portfolios it is actually more like just a bumpy road than a roller coaster!

As ever, if you have any concerns, please do contact me.

Onto the commentary…

Just when the situation in the Eurozone appeared to be moving in the right direction with the agreement last week (has anyone else noticed every time I leave the country markets seem to rise…? Perhaps I should operate from abroad?) on a further bailout package and a voluntary 50% haircut on Greek sovereign debt, we had the unexpected announcement this week that the Greek government has decided to hold a referendum on the latest euro-zone package, probably in December or January.

In reality, the Greek government is simply trying to foster public support as it provides the Greek population with the decision between continuing austerity and membership of the single currency. Some might call it a gamble.

Data from opinion polls suggest that although 60% are opposed to the new Eurozone package (and continuing austerity), approximately 70% want to remain in the Euro. And let’s be clear about it… if Greece want to remain in the single currency then it will have to take the medicine prescribed by the Eurozone governments (primarily Germany and France). The alternative is for Greece to leave the Euro but this route is not (publically at least) on the table for Greece or the other sixteen members of the Eurozone.

I felt that the global market reaction to last Thursday’s announcement was overdone (again) as we had only seen headlines from the Eurozone governments with little detail on how these packages and targets would be achieved. Certainty is a crucial factor for global investment markets and the re-emergence of uncertainty has led to the significant falls in global equity markets yesterday and today (writing at 9:30 am Weds).

As I have said in the past, in my role as Advisor / Manager of your portfolio(s), part of my job is to read, research, analyse and assimilate as much information as possible to inform and then blend the asset allocation models and investment strategy. It is far from a rosy picture for the global economy at present but, as I have stated in the past, ‘investors’ or ‘the markets’ do have a tendency to overreact to “news”, either on the upside or downside, and I believe that this is the case today. Investor sentiment, rather than economic data is the key driver of global investment markets in the very short term.

Although it is far from easy, I continue to believe that patience is important, ultimately economic fundamentals will win out and the vast majority of clients should remain invested in line with the diversified Model Portfolios.

As I say at the outset of this post, I expect an extended period of volatility in global investment markets – and this will no doubt be magnified in the run up to the proposed Greek referendum, and I will continue my regular dialogue to ensure that client portfolios are positioned to meet the dual mandate of creating and preserving wealth based upon our your attitude to risk and volatility.