July 2015 Update
Markets recover after new Greece bailout deal
Nervous holidaymakers joined investors in keeping a keen eye on the unfolding financial crisis in Greece. However, signs that the country might at last reach a resolution with its creditors helped support equity markets.
An agreement was finally thrashed out during all-night talks. The Greek parliament approved austerity measures under the €86 billion bailout plan, in exchange for which Eurozone nations provided Greece with a €7.2 billion bridging loan and the European Central Bank pumped €900 million into the Greek banking sector. German politicians backed the plan, at the urging of Chancellor Angela Merkel.
News of the deal sparked widespread relief among investors and markets recovered much of the ground that had been lost the previous month.
In the UK, sentiment was further supported by strong economic data. UK gross domestic product (GDP) expanded by 0.7% in the second quarter of the year. The UK has now passed an important milestone, with GDP per capita back above its post-downturn peak.
The news fuelled speculation that an interest rate rise is on the cards. In mid-July, Bank of England governor Mark Carney indicated that the first increase could be "around the turn of the year". However, several factors could still delay a rate rise, as inflation remains subdued.
After two months of significant volatility, bond markets were relatively calm during July. Optimism surrounding the Greek bailout deal resulted in investors shunning 'safe haven' assets such as government bonds. Instead, the attractions of corporate bonds, especially high yield bonds, came to the fore. As a result, corporate bonds outperformed their government-issued equivalents, though most parts of the bond market ended the month in positive territory.
The UK commercial property market also produced gains. Robust occupier demand and low levels of supply continue to fuel rental growth in the office and industrial sectors, while capital values also enjoyed further gains across most parts of the market.
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 31 July 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.