June 2015 Update
Greece remain in the Eurozone despite defaulting
The Eurozone, particularly Greece's tribulations, drew the attention of investors worldwide during June. A series of failed negotiations and attempts to secure further bailout funding increased fears that the country would be forced to leave the Eurozone.
Investors were right to be unsettled, as botched bailout negotiations meant that Greece did indeed default, failing to return €1.5 billion to the International Monetary Fund. This made Greece the first developed nation to fail to meet its obligations in this way.
The crisis deepened after Prime Minister Alexis Tsipras irked creditors by calling for a referendum on the bailout terms, including pension cuts and tax hikes. The European Central Bank reacted by hardening its stance and freezing funding for Greece, forcing the government to close its banks and impose capital controls.
However, it was the UK stock market that suffered some of the heaviest losses over the month, dragged lower by energy and mining stocks. Oil price weakness in particular has affected financial markets across the world over the last year, due to the impact on inflation. If June's price movements are any indication, oil will not be the source of inflationary pressures any time soon.
A glut in supply from the North Sea was behind much of the price weakness. Supertankers full of oil have been anchored in the North Sea, while unsold cargoes of west African crude are further swelling global supplies.
Despite the absence of inflationary pressures, bond markets struggled. This was largely a result of movements in the German government bond market. Yields had fallen to record lows and there appeared to be a collective realisation that the overvaluation had gone too far. UK Gilts and US Treasuries followed the German Bund market's lead. Investors have started to predict interest rate rises in these areas within coming months.
The UK commercial property market had another robust month as capital values continued to rise. Despite some month-to-month variations since the start of the year, investor interest has shown no real sign of waning. That said, there are concerns that parts of the market are becoming increasingly overpriced, with yields continuing to fall as prices rise well ahead of rental growth.
Should I make any changes to my investments?
Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.
One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes, take a look at our An introduction to diversification in multi-asset funds guide.
Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, you can find one local to you by visiting find a financial adviser, which is responsible for promoting financial advice in the UK.
All figures quoted are in sterling terms to 30 June 2015 unless otherwise stated.
The information contained in this article has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact.
Investment markets and conditions can change rapidly and, as such, the views expressed in this update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, can not be guaranteed and should not be relied on when making investment decisions.