By David Cooper, Fund Advisers Europe
Bond yields are rising to record highs.
European leaders suspend aid to Athens.
Greece staggers closer to default before the year end.
France and Germany stand united, issuing ultimatums to the Athens parliament to decide on the future of their membership of the Euro.
These events have led to financial institutions, down to private retail investors losing confidence in European based investments – both bonds and equity.
Conflicting statements from the Greek leaders regarding their intentions and wishes around membership of the Eurozone, are prolonging the uncertainty and with MP's resigning from the ruling party, their majority has been cut to just one.
Yesterday's announcement that the referendum was to be cancelled brought some relief, however can this be considered a long term situation, or should we expect a further change from Athens?
One thing appears clear, at least from the outside, the aid package offered to Greece is dependent upon them remaining within the Eurozone and completing on their agreed austerity package. If they leave, the aid will be withdrawn. Patience is wearing thin within Paris and Berlin on the procrastinating around the referendum and the arguments surrounding the wording. Given the level of aid offered, commentators are wondering what exactly Greece has as a Plan B?One quipped, that with more Porsche Cayennes registered in the country than top rate tax payers, is it any wonder the country is struggling to come to terms with the strict terms of repayments it currently faces?
The domino effect is starting to happen. Italy has failed to reach internal agreement on re-structuring. The €30bn 10 year bond issue in favour of Ireland, has been postponed because of market uncertainty. Plans to overhaul the €440bn Eurozone rescue fund, have been brought forward in an attempt to reassure markets.
In short, the future in Europe is decidedly bleak.
So where does this leave investors?
For existing investors, moving away from European based investments seems essential. There are positive signs in developing markets, China has started to more away from a boom/bust cycle and possibly the most encouraging news is that the USA is starting to show signs of genuine recovery.
Suggestions are that the Fed will further ease monetary policy, Ben Bernanke announced that asset purchases were a viable option, this too was well received. Predicted inflation is at, or below target levels. Unemployment is still an issue, but is at least now showing signs of abatement.
Monetary policy looks set to remain unchanged in the short term, following on from two drastic moves in August and September.
The Open Market Committee has a united approach, with only one member pushing to move forward existing plans to a shorter timetable.
All of these factors combined to give the US stock markets some strong returns, and more importantly to turn US Treasury prices positive.
Fund Advisers Europe moved clients away from European Equities, and into North American Equities in anticipation of these events. Our discretionary management team sold higher risk holdings to cash, before markets fell.
We strongly advocate those looking for new investment opportunities to buy now, buy bravely and reap the rewards of your courage – but to do this with the help and guidance of our professional team.
For those with existing investments portfolios or a more cautious approach to investing, we offer access to our non-correlated investment programmes that are protecting the capital of our clients and currently achieving a 7-9%p.a. return this year, placing them in the best possible position for when global markets move back into positive territory.
In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497. Warren Buffett
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Author Bio
David Cooper is a Director of Fund Advisers Europe, a Financial Services company offering a broad range of Investment and Insurance Services to clients across Europe and Latin America. The majority of David’s early experience was gained by working for Lloyds Bank in the United Kingdom. David now has over 20 years' experience growing wealth management brokerages throughout Europe, the Caribbean and Latin America. The primary objective of his role at Fund Advisers is the creation of growth in Fund Advisers’ Wealth Management & Discretionary Fund Management division. David lives in Geneva with his family.
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