Greece has been heavily in the news over the last few weeks and we’ve have been receiving phone calls from investors looking for information as to how this has affected their portfolio.
Markets have become very volatile over the last few months as investors digest newsflow coming out of Greece as we seem to lurch from one meeting to another on the Euro merry-go-round.
You have read the Greek Prime Minister, Alexis Tsipras, has called for a referendum on July 5th on austerity measures. The outcome of this and also whether the European Central Bank believes it can still allow funds to flow to prevent banks in Greece from collapsing, will decide whether Greece stays within the Euro.
Following the announcement Greece closed its banks and stockmarkets until at least July 6th and also imposed capital controls limiting daily cash withdrawals to €60 (£42) a day and banning payments and transfers abroad. Greece’s current aid package expires on 30th June and it is also due to pay the International Monetary Fund a payment of €1.6bn tomorrow as well, on which it is likely to default.
Nobody can say whether or not Greece will leave the Eurozone as this is uncharted territory.
Looking at the markets, over the last few weeks, investors had taken a wait and see attitude and had become more optimistic about a positive outcome. This has now reversed and equity markets have fallen back this morning. Looking at the bond market, yields have sharply risen for Italy, Spain and Portugal although, in contrast, German bond yields have fallen, their bonds being seen as safer in times of a crisis.
For many investors the big worry is on “contagion”, where if Greece leaves the Euro pressure could be applied to the less economically strong countries such as Portugal, Spain and Italy to also leave further down the line. Many commentators, however, believe that the European Central Bank will step on any sign of contagion with further QE measures to calm markets.
Having taken soundings from some of the fund managers that I regular recommend, you will see below that they are all employing different tactics in order to try to manage the market volatility.
Schroders have kept a larger than normal cash balance which will have been positive for performance this month. The managers are nervous on markets, especially the bond market, where they feel liquidity could be stretched if investors look elsewhere to place their cash.
SEI look to offer solid returns with controlled volatility. Their position of selling the Euro currency and buying US Dollars will have helped performance against the Greek backdrop.
Close Brothers believe that markets still haven’t fully priced in the possibility of a “Grexit”, so we could see some short term volatility. Over the long term, they believe European growth will not be derailed and weakness in the European markets could be a good buying opportunity.
The conclusion from this is that until the problems in Greece start to be resolved, volatility will continue to be a feature within markets. As always we believe that diversification within portfolios, both within asset classes and geographically, is even now more important than ever.
By way of reminder any investment should viewed as a medium to long term hold meaning minimum 5 years to 10 years, in order to take into account the inevitable peaks and troughs.
If you are concerned about your investments and or haven’t reviewed them recently, then please don’t hesitate us on 01452 560470 to book in a review.