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Octopus identifies four themes affecting markets

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Octopus Investments reports that four key themes affected investment markets in July. “First, the latest developments in Greece saw some short-term economic stability return to the country, but it still lacks a long-term resolution to its debt problem,” the firm writes. 

Secondly, the comment that recent events in China suggest its economy is slowing down, which isn’t good for the global economy, while thirdly, the potential that US Federal Reserve (Fed) will raise interest rates in September is looming and finally, July is the month when many large, publicly traded companies release their quarterly corporate earnings figures for the three months to 30 June. 

“We have continued to adopt a cautious approach in our portfolios in light of the four themes. We hold historically high levels of cash and will look to invest this when attractive opportunities arise.”

Oliver Wallin (pictured), Investment Director at Octopus, says: “We continue to adopt a cautious approach in our portfolios. We have moved to a more neutral view on equities, while favouring Europe and Japan over other economies. The European Central Bank (ECB) continues with its ongoing quantitative easing (QE) programme which, combined with uncertainty about Greece, should continue to weaken the euro against sterling. With QE, a low oil price and improving data from economies such as Spain, we retain our more favourable view on European equities. However, we reduced European holdings in July as we await opportunities to buy back into the market when the situation in Greece becomes clearer.

“Given uncertainty over China’s economy, and about commodity prices, we are cautious about emerging markets. Our view on bonds is unchanged and we remain wary. We aim to reduce the risk of holding bonds when interest rates rise by investing in bonds that are held for a shorter period before they mature and favouring bonds issued by companies rather than governments. We will continue to use alternative investments, such as hedge funds that follow various strategies to earn positive returns for investors, rather than bonds, to diversify potential equity risk in the portfolio. We hold historically high levels of cash and will look to invest this when attractive opportunities arise.”

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