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Investors should consider risks in Europe – Quilter Cheviot

Investors should consider risks in Europe – Quilter Cheviot

Investors should be protecting portfolios against the possibility of higher risk in the eurozone, Duncan Gwyther, chief investment officer for Quilter Cheviot, has warned.

While he said it was unlikely Greece would leave the eurozone, he warned that now was a good time to take action to reduce investors’ risk within portfolios.

He said data suggested equity markets had moved into the upper half of their trading range. With equity markets currently failing to price in a Greek exit, he said there was little potential upside to a resolution of the Greek stand-off.

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Instead, he considered there could be a “significant negative impact should the worst-case exit scenario occur”.

Overall, the managers have trimmed their overweight position in risk assets by reducing European equities by 1.5 per cent and Asia Pacific equities (excluding Japan) by 1 per cent, while increasing cash by 2.5 per cent.

Mr Gwyther said: “The decision has been made as a short-term hedge, rather than a long-term view. The cash weighting has been increased ahead of a possible market dip, in which case money can be added back to equities.”

Adviser view

Ben Brettell, senior economist for Bristol-based Hargreaves Lansdown, said: “As ever, it is almost impossible to predict where markets are heading, but over the long term you give yourself the best chance of success if you buy when markets are cheap.

“The negative sentiment towards Europe as a whole has depressed share prices across the continent, in many cases disregarding the underlying strength and earnings potential of the businesses. In our view this is a long-term opportunity.”