2018 saw the culmination of a series of economic risks; US interest rates; the approaching end of the economic cycle; trade wars and other geopolitical issues; and of course Brexit. In terms of markets, it was one of the toughest years we have seen since the Global Financial Crisis in 2008. In this environment, there have been very few positives and we saw some drops in portfolios as result. [click to continue…]
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Throughout the final quarter of 2018, the ever-changing US trade policy was the major event affecting stock market activity, but both US and Asian markets reacted very differently to each other. In addition to this, the US initiated a further interest rate rise in September, with a further rise forecasted for December.
The effect of these steadily rising rates shouldn’t cause too much harm to equity markets, as it looks like companies are well-placed to deal with less generous financial conditions, but those with high levels of debt may find it increasingly difficult to do so.
In the US, Europe and Emerging Markets, economic fundamentals remain strong, and we believe that these are likely to be the strong foundations on which to build success. The next earnings season starts again in October, and will provide us with a further indication of the health of the market. We anticipate that most companies will demonstrate further positive progress, though perhaps not at the rate we saw earlier in 2018, as the effects of tax cuts start to dissipate.
In the UK, we saw assets struggle to make progress as Theresa May failed to make any significant headway in her Brexit negotiations. As the March 29th 2019 deadline looms, it is essential that we see a resolution soon, and we are continuing with our low UK holdings to protect against the potential negative outcomes of this.
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The unwelcome volatility at the beginning of the year was succeeded by a period of good stock market progress, though pockets of uncertainty were evident at times.
Investors warmed to the ideas that spooked them earlier in the year as inflation worries subsided and were replaced by fears of escalating ‘trade wars’, fuelled by the US’s tariffs on many countries, including some of its allies. Another interest rate rise from the US was accepted by markets without much fuss and most developed market bonds ended up broadly flat after yields on the 10-year US Treasury moved up to 3%, a level which seems to deter further selling. [click to continue…]
The first quarter of 2018 finished in a very different fashion to the one it started in. Recent moves have highlighted uncertainty and brought back volatility that was missing for most of last year.
While these stock market movements were arguably overdue, we believe that they will also be short-lived and that, while elevated levels of movement may be more frequent this year, they will not be here for good. Bond markets also fell over the quarter but many regained their losses by the end of March and the fears over interest rate increases in the US subsided, though these are likely to re-emerge as we move into the summer.
Stock market indices have fallen over the last 24 hours on the widely expected introduction of trade tariffs by the US, mainly directed at China, to come into effect in around a month’s time (after a ‘comment period’), meaning that the uncertainty caused by these moves may be prolonged.
From the details that have emerged, the tariffs will likely affect $50bn worth of imported goods and the proposed tariff level will be 25%, which the White House believe will be sufficient to block trade in the affected areas. The list of specific goods to be targeted will be released early next week but will include aerospace, information communication technology, and machinery. The tariffs themselves will not have a fundamental impact on China (initial estimates show this would affect around 0.25% of China’s GDP), but the larger worry is over the potential escalation of these measures and a descent into a ‘trade war’.
From Blue Planet II showing how our oceans are full of plastic or the banning of plastic microbeads in soaps and cosmetics to the rise of Fairtrade products, it has been hard to escape the realisation that people are waking up to ethical and environmental concerns. This increasing awareness isn’t just limited to the physical products we buy, either – more investors are choosing portfolios that support their views on social and ethical concerns as well as meeting their financial goals and objectives. [click to continue…]
As you may have observed there were significant downward movements in US equities yesterday and markets have opened negatively this morning in most regions. As we have alluded to in recent communications, the threat of a pull-back in stock markets has been hovering over us for some time and the catalyst was one that we had been watching closely. The initial source of worry was the stronger-than-expected US employment and wage growth data at the end of last week. While this sparked concerns of higher inflation and, consequently, more interest rate increases than anticipated, the driver of much of the volatility in markets was largely due to the increased volume of trading in Exchange Traded Funds (ETF) and by high-frequency traders, which exacerbate severe market movements. As ETFs make up nearly 20% of US trading volumes markets can move very quickly on these sort of unusual movements. [click to continue…]
Happy New Year! We hope that you have had a wonderful break over the festive season and are looking forward to 2018.
For the second year running we have been positively surprised by the resilience of markets, with near record low levels of volatility across asset classes, as well as indices at or near all-time highs. Although valuations appear lofty, we still see positivity in many areas including Europe, Japan and Asia.
Over the last quarter, higher rated bonds performed better than most in Fixed Interest, but we maintain our low interest rate sensitivity stance to protect capital whilst collecting a handsome yield. Global growth and continued Quantitative Easing (QE) should help to support fragile bond-issuers, but we remain selective in the credits we are exposed to.
Our considered equity allocation proved beneficial over the period as our higher conviction areas provided the best performance. We remain underweight UK as we perceive that there are better opportunities elsewhere which we expect to continue over the next quarter.
With the UK’s most recent economic figures showing a likely slowdown in expansion and the US potentially moving toward the same, investors might be forgiven for looking elsewhere for returns. Even China, the current ‘powerhouse’ of global growth in recent years, has lower growth targets now as the country has matured enormously over the last decade. Against this backdrop, India – the world’s largest democracy – has become a relevant and exciting prospect for growth-hungry investors.