Asset Allocation for June 2018

In May populist government was formed in Italy. Emerging markets among Turkey, Argentina and Brazil bumped into debt problems.

Growing volatility in Euro currency and on European stock market in May was caused by political uncertainty in Italy. During last month the leaders of radical parties Lega North and 5 Star Movement were coming to agreement about head of government. Finally Giuseppe Conte became a prime minister and formed the Eurosceptic government. He declared for negotiations with ECB on budget and social liberalization in Italy.

Euro has found its support after members of ECB announced possible measures in decreasing current bond buying program. In this case it could be the start of ECB’s monetary policy toughening.

Ad interim Turkish, Argentinian and Brazilian currencies devaluated sharply by reason of national economic problems and risks in external debt repayments. At the start of June the IMF approved unprecedented decision to lend $50 billion to Argentina one-tranche that surprised many experts.

Threat and challenges in world markets:
 - Monetary policy tightening by ECB
 - Monetary policy tightening by US FED
 - Debt problems in Turkey, Argentina and Brazil

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