The first half of 2015 looked set fair to offer a promising start to the year but ultimately investors were left feeling short-changed by the time 30th June arrived. The attractive base that had been built in the early part of the year was impacted by the decline in markets in June. While uncertainty over the debt negotiations in Greece and the future of the euro were the main concerns, the manner in which both equities and bonds were affected was the startling feature with the pain of the initial failure to get an agreement over the debt talks for Greece distributed equally.

After the harrowing period witnessed in June, markets have since regained their poise as investors digest the implications of the agreement achieved between Greece and the European Union. We have read a large amount of literature predicting doom and gloom both pre and post the settlement in Greece. Whilst we can’t predict when and where the future strains in the fortunes of Greece or additional European countries will emerge, we refused to be shaken out of any of our investments ahead of the deadline for a settlement. This mirrored our views on previous occasions when there has been an EU debt “crisis,” namely that politicians rarely act to make themselves redundant – as they inevitably would have been if there had been a Greek exit from the EU. The media remained all too quick to take a negative stance on almost any story about the possibility of a resolution in Greece. A resolution was there to be found eventually and the fine-tuning of the settlement can now take place.
We never believe it is appropriate to act in too euphoric or pessimistic a manner and that predicating an investment strategy on a knee-jerk reaction to one piece of news, however bleak it seems at the time, is not appropriate.

The additional highlight of the first half of the year was principally the fall in the Chinese equity markets – following a pronounced period of strong performance. We take the same line on China as one of our favourite equity market strategists, that the drop in the equity markets reflect a period of cooling down for financial assets rather than anything dramatically changing in the underlying economy. We remain keen on Asia as a whole due to rising consumption and supportive demographics. When the leap in the levels of innovation of the leading Asian technology businesses is aligned with the ongoing structural development in Asia, the prospects for earnings is impressive, particularly when compared with some other parts of the emerging market peer group.

In terms of any particular sector of global equity markets being rewarded, or whether the current favourites will continue, there is no doubt we have to acknowledge that it has been a period when the popularity for income generating equities has been almost unrivalled. We will be checking for signs of the durability of this trend. At the same time, the ongoing rise in the popularity of technology shares points to a possible swing in sentiment towards growth. Companies which consistently prove to be thorns in the side of significantly large well establish rivals, whether that be in retail, healthcare or ecommerce, will need to be monitored. Finally, those businesses where the value of the investment in their own intellectual innovations is not currently recognised by investors, despite the company reporting rapid progress, offer enticing levels of potential.

For the first time in a long time the major central banks are likely to take differing actions over the next 6-12 months. The Federal Reserve in America is now likely to raise interest rates towards the end of 2015 and the Bank of England, emboldened by the passing of the UK General Election, beginning to talk about the possibility of raising interest rates in 2016. This stands at odds with the need for the Bank of Japan and the European Central Bank to carry on with their current accommodating stance. In the short-run, we are hopeful that with issues such as the Greek debt settlement having taken place, the need for investors to feel excessively pessimistic can disappear. Longer term we believe no central bank will look to raise interest rates until they can be sure their economies and monetary systems have come close to recovering from the nerve shredding damage to the global financial system which the world has been overcoming since late 2008.

Overall we remain firm believers in the new levels of innovation, technology and global economic development currently being seen on an almost daily basis, delivering a positive backdrop for financial assets well into the latter part of this decade for those investors with a clear objective for their portfolio