It seems as though efforts to seek an adequate risk-reward trade-off are proving difficult to futile for many. The German 10Y Bund has historically broken the zero yield barrier yesterday as investor monies continue to rush into safe haven assets, as renewed fears of a Brexit, a continued slowdown in China and weak US economic data persist.

Safe haven assets are unattractive at such levels, yet the hedge against uncertainty seems to comfort investors amidst the ongoing volatility being experienced in global markets.

A Brexit has become a real possibility in recent weeks, with polls putting the result too close to call. An ensuing chain reaction of negative consequences would unfortunately engulf the majority of the Eurozone. For starters, a Yes vote could have a major influence on anti-EU parties across the Bloc. Political parties such as the Front National in France would gain a boost of confidence ahead of upcoming elections, seeing the UK successful in leaving the EU-Bloc.

The pressure would certainly be felt by EU policy makers to sustain the integrity, credibility and authority of the Bloc across its member states. Other than the reimplementation of border controls, economic challenges related to trade barriers and more will be heavily impacted.

If the Brexit volatility wasn’t enough to digest, Chinese data continued to disappoint. With commodities heavily linked to the nation, fluctuations in commodity prices seem set to persist for a while.

Companies notably within the commodity sector, face tough restructuring challenges and a need for flexible capital expenditure policies, to cater for the persistently low commodity prices expected in the current environment.

Many companies in difficulty out of this sector have avoided default for the time being, by selling non-core operational assets for short term liquidity needs. Although not adopted by all, long- term, such a strategy is unsustainable given cash from operations fails to pick up.

The US and Emerging Markets as investment alternatives don’t currently add to investor appetite either. With jobs data disappointing in the latest round of data to emerge from the US, investors are cautious in holding risky US assets, especially given further interest rate hike expectations being pushed back to late 2016.

This leaves us with Emerging Markets. Despite the asset class being heavily oversold at the peak of the commodity crisis, uncertainty remains vis a vis a US rate hike impact on emerging market currencies. Emerging market nations are predominantly financed in USD and would incur higher repayment costs as a result.

At this point short term FX trades or holding on to cash are some of the limited options investors may consider. FX trades however, require a fare bit of speculation, therefore the risk averse investor may very well turn to holding on to cash, even more now, given that 10Y Bund yields have breached the zero yield barrier.

This article was issued by Mathieu Ganado, Junior 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.