If we thought that the worst of the market correction and volatility in emerging markets and commodities in the latter trading sessions of 2015 was over our shoulders, we were mistaken. Markets woke up to a crude awakening in the first 6 weeks of 2016. From weakness in the Chinese economy to lower commodity prices and global economic data persistently disappointing to the downside, markets witnessed a marked increase in risk aversion as the capital flight to safety caused a widespread correction in equity and corporate bond markets.

Markets were offered some respite following market friendly statements from the European Central Bank, US Federal Reserve and Bank of Japan towards the end of January, only to resume their downward trajectory shortly thereafter.

Market sentiment dropped, investor's risk appetite remains weak whilst global economic data and trade continue to indicate challenging trends. This year has really started with a bang and is surely to keep investors, asset managers and policy makers pretty much on their toes for the good part of 2016.

This has left investors somewhat perplexed and sparked a sharp increase in risk aversion, with investors and asset managers alike de-risking their portfolios, sending risky assets’ (equities, investment grade credit and high yield bonds) total returns further in the red since the start of 2016. Clearly not the start of the year investors would have hoped for. There was a clear winner in all this turmoil, and that was safe haven government bonds, with the German Bund and US Treasuries standing out in particular. Long-dated Bunds in fact reached a total return (up to last week) in excess of 6%, causing yields to test their April 2015 historical lows as investors sought the capital preservation over holding on to more risk.

However, over the past two trading sessions, particularly with talk over the weekend that the ECB could be pondering the purchase of bad loans held by Italian banks, and yesterday’s rhetoric by Mario Draghi about the likelihood of additional accommodative measures in the March 2016 Monetary Policy Committee meeting; conventional on unconventional – the market is indifferent at this stage, the market wants action, and is clearly pricing some given the price movements since Thursday.

The question many investors might be pondering right now is to whether now is the opportune moment to dip back or drip feed into the market, following the market friendly tone of late by the ECB. However, the disappointing December 2015 ECB meeting is only 9-10 weeks ago and is surely to be fresh on investor’s minds, and how they got tricked / trapped / fooled, call it whatever you like, in the run up to the ECB – we all know how that ended, Super Mario fell way short of market expectations, the market didn’t take it too well and still has not recovered to date.

So is it buy the rumour, sell the news? Once bitten, twice shy? I think that the build-up (expected rally from this point forth) to the March 2016 will not be as sharp as that for the December 2015 meeting, and I would expect investors to be warier and more cautious this time round. What is certain is that there are a number of trading opportunities out there; it’s all about knowing when the time to get out is, even if it means taking a painful loss.

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.