The situation on the international capital markets remains strained. After China, Russia (sanctions owing to the Skripal affair) and now also the Turkey received its just deserts. The Trump administration is doing a great job to uphold volatility during the “silly” summer season, a period when there are no major news releases. Especially the Turkey is in a state of crisis. Since Erdogan took office the currency has more than halved and in addition the markets fear major write-off risks at European greater banks that are more involved in the Turkey. False monetary signals set by the Turkish Government and a central bank that is obviously not independent are connected with homemade problems (balance of payment deficit, low savings rate, high inflation). Result: Dramatic loss of confidence in the markets. And the “summer-blues”-list could be continued almost indefinitely: Brexit fears, peso crisis, devaluation of the ruble. But it is remarkable how the US markets, above all the NASDAQ, are ignoring these imbalances and show stability.
First of all, we need to keep calm. During the summer months the markets tend to be less liquid and respond more strongly to news than usual. Algotrader seem to determine the direction of the markets. Even if we should never ignore the tendencies of a growing protectionism, threatening trade wars, and local trouble spots, the growth and earnings prospects, particularly in the USA, as well as in large parts of Europe, are high and many companies display healthy fundamentals. Investors are aware of it and seem to position themselves for share price increases in autumn.
A widely diversified international portfolio, including real and uncorrelated assets, and a stringent risk management have always been a guarantee for the success of investors who think and act in the long term and who always keep calm even in times of short-term fluctuations.