Asset Allocation for August 2016

In July risk assets showed impressive growth – investors were hunting for high yields, expecting fresh economic stimulus from central banks.

Brexit led to rise in expectations of new monetary easing from developed countries central banks and new money flows to security markets. Actually Swiss, Japanese and Australian central banks decided to deepen their assets purchase programs. Moreover, expectations of the next FOMC rate hike from 0.5% to 0.75% decreased significantly.

At the same time, many negative facts were ignored by investors, such as fall in oil prices, fragility of European banks and downgrades in GDP growth forecasts of US, EU and UK.

In August we will see a reappraisal of the current market level. Particularly, the correction on US market should be caused by low earnings projections for the future periods. Banks should become the main outsiders in Europe as they are suffering from currency turmoil and deposits outflow.

Threat and challenges in world markets:
   - Presidential Elections in US (8th November 2016)
   - Credit market bubble in China
   - BREXIT aftermath – EU disruption and political crisis

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