This is very insightful from John Chatfeild-Roberts, chief investment officer of Jupiter Asset Management on the news from Greece at the start of the week.
The news overnight of a potential referendum in Greece serves as a useful reminder that in this long-running Greek tragedy there can be no quick fixes and that when politicians are in charge of finding solutions, it is foolish to make assumptions about the outcome.
Even before the announcement by the Greek president last night, it was clear the hard-fought deal announced by Europe’s leaders last week was not what the markets were looking for. While equity markets rallied initially on news of the deal, Italian bond yields told the real story: the deal would not be enough to stave off the market’s fear of contagion, not only for the so-called ‘Olive belt’ but for core European nations such as France. By Monday, the equity rally had faded away and today, Italian bond yields moved within a whisker of their all-time highs.
I would not claim to know where this saga is heading in the short term and would question anyone who claims they do. Longer term, we believe, the endgame is either fiscal union or a smaller but stronger membership of the euro; we just cannot be sure what route the politicians will take to get there.
For investors, nothing has changed. As the distinguished mathematician John Allen Paulos said: ‘Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security’.
I would add that as always in investment, patience is required and volatility always creates opportunities. It is essential we don’t get too caught up in the short term emotion in markets but instead focus on identifying those companies that are likely to do well over the medium to long term and emerge from difficult periods such as these in stronger positions than they entered it.
The irony today is that while the macro picture is depressing in the developed world, there are also a lot of extremely healthy multi-national corporate balance sheets to be found. Many of them are capable of paying healthy dividends that in this environment of ultra-low interest rates and high inflation, investors could be hard-pressed to beat. Furthermore, we must remember that there is a rapidly growing middle class in the emerging markets who have a growing ability to spend. There is a good chance that when they do start to spend at western levels, we might witness a genuine de-coupling of the two speed global economy that exists today.
* Important note – this material is provided for informational purposes only as a general market commentary and does not constitute any form of regulated financial advice. Specific advice can only be provided after your personal circumstances, attitude to investment risk and financial objectives have been discussed and agreed.
