In short, we can state that the first part of this year had highs and lows. Following the implementation of the ‘Quantitative Easing’ (QE or Quantitative Easing), a monetary policy whereby central banks buy up bonds), European equities recorded an average decline of more than 10% in the first semester. The financial markets also had turbulent times due to a resurgence of the Greek crisis.
The cards were different in Asia. Driven by government measures in Japan, markets continued to rise. The boom in Chinese markets was largely due to technical, non-economic reasons. By connecting the Hong Kong and Shanghai stock exchanges, the Chinese market became more accessible to Chinese and international investors.
Since mid-May, market volatility has increased dramatically. China is currently devaluing its currency (Yuan) to boost exports and to economically dampen future interest rate rises in the US. In the United States, the growth potential in the medium term was always present. But the expectations were so high that disappointments did not materialize.
What can we expect in the second part of the year?
- Mrs. Dellen (president of the Fed, the US central bank) will announce an interest rate rise. Perhaps that will rather be a limited, ‘symbolic’ increase.
- The results of the elections in a number of the European Member States such as Spain and Portugal will be closely monitored.
- The aftermath of the Greek Bailout 3 and its consequences.
Which investment options can complete your portfolio?
Think of Europe in the first place. Compared to the beginning of this year, the arguments for investing in this region are unchanged:
- devaluation of the currency;
- favorable monetary policy;
- monetary injection;
In the United States , an interest rate rise can be advantageous for various sectors: banks and insurance, real estate, car. In Asia , central bank policies could continue to stimulate markets despite fluctuations in recent months.
Shares or bonds?
Our analysts believe that both asset classes continue to offer investment opportunities. As far as bonds are concerned , we continue to enjoy the quantitative easing in Asian (Australia, China) and European (Italy, Spain) countries.
In the area of corporate bonds:
- our preference continues to be for bonds issued by banking institutions;
- we mainly opt for bond funds that follow the evolution of interest rates. Such bonds benefit from rising interest rates. In addition, there are the bonds that benefit from increases in the stock market, while still maintaining their bond structure (convertible bonds).
- the high-yield bonds (of the High Yield type) can perpetuate the yield of bonds (coupons), especially now that the low interest rates penalize savers. On the stock market we look forward to:
- sectors benefiting from the rise in US interest rates;
- a recovery of the European economy;
- a new macroeconomic balance in Asia.
Conclusion: an encouraging year-end
Many signals indicate a less tumultuous year-end:
- The volatility of recent months has brought valuations from different regions of the world to an attractive level.
- The expected rise in interest rates in the United States gives us the opportunity to focus on other segments (consumption, credit).
- The fall of the euro against the dollar is still a windfall for export-oriented European companies. Before the end of 2015, we will continue to focus primarily on diversification in growth sectors. This is the time to review your portfolio and to respond to the recent opportunities on the stock market. At the same time, you can reposition yourself in segments that can cope with fairly turbulent markets.