Investors have quite a few issues to contend with these days, and most of them are quite a tough nut to crack. Is the fresh wave of QE by the ECB going to have its intended outcome? When is economic activity in the Eurozone going to finally pick up? And what about Eurozone inflation - will the ECB’s target of 2% ever be reached or will Mario Draghi be compelled to lower this target.

What about the US? Is the US economy growing enough to warrant and sustain additional rate hikes this year? Has the impact of robust but volatile economic data coupled with weak commodity prices and overall weak external demand kept the Fed on hold? We were almost certain than an interest rate hike was on the cards till a couple of weeks ago, only to be disappointed by the sharp reversal and revision in employment and housing data coupled with increased uncertainty in global capital markets?

Then we have got one of the major events which is clearly characterising investor sentiment and market direction. There has been an increased trend in polls of late indicating that Brits are expected to vote in favour of a British exit from the EU on June 23rd.

On one end, we have got the camp who question the reliability of these polls and state that the ‘undecided’ vote will likely be the game changer in 9 days’ time, whilst, on the other hand, others are almost certain that the exit vote will prevail. What is certain is that the No vote being ahead of the polls has not gone down so well with investors.

The British pound has weakened markedly, equity markets are in disarray, and the risk off mode button is on. Not just in the UK but all over the place. The short end of the curve and cash is the short term trade of the moment, and with trading volumes expected to subside over the summer months, any market moves are expected to be even further exacerbated.

From mid-February till mid-May 2016, we witnessed a marked rally in commodity prices and emerging markets. Having said this, the US Dollar and the trajectory of interest rates in the US continued to be the greatest contributor to uncertainty and volatility within the commodities and emerging market space of late, with the more defensive regions such as Asia and Europe remaining better bid.

But the real question mark from this point forth is on the flight of default rates. Can emerging market issuers withstand the persistent dollar strength? Do commodity prices need to rally even further so as to render businesses in such economies more sustainable and avoid default?

Geopolitical tensions have seemed to subside over recent weeks (or let’s say they’ve gone dormant) but nevertheless have the potential of causing wreck and havoc, and could be the final straw in this concoction which could result in a sharp market correction. Or else at best, markets could tread along and be oblivious to its surroundings.

I think both scenarios are extreme cases, but I would be more skewed towards expecting a milder version of the former to occur, giving investors an opportunity to take advantage of cheaper valuations albeit at thinner trading volumes.

This article was issued by Mark Vella, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.