August 3, 2015
Second Quarter 2015: Investment Perspective
Financial assets had mixed performance in the second quarter. The quarter was marked by two headline events — the sell-off in the Chinese “A-share” market and the tortured negotiations surrounding the bailout of Greece. While both events caused turbulence in financial markets, we believe that neither poses the risk of systemic contagion or a threat to real economic activity. Greece represents less than 2% of euro zone output, and its liabilities are predominantly held by government entities. An eventual default and exit by Greece seems unlikely to impair confidence in the euro zone and may even work to make the euro safer in the long term. We discuss the impact of the sell-off in China more fully later, but our conclusion is that the loss of wealth is confined to a small set of domestic Chinese holders.
The two episodes highlight how vulnerable global financial markets are to temporary bouts of volatility. We are extremely mindful of exogenous shocks but also careful to discern true dislocations from temporary volatility. Frequently, the volatility affords us the opportunity to reposition portfolios to more attractive long-term risk/reward positions. We continue to find value in International Developed and Emerging Market equities and Commodities.
On a quarterly basis, Hirtle Callaghan publishes our perspective on the current market. We have included the first page of that piece below. If you would like to receive the full perspective, please contact us.