Market Outlook Summary
Markets buoyed by optimising over US- China trade talks
The United States and China have bolstered market confidence that they will roll back their trade war after officials concluded three days of negotiations in sanguine spirits. During January, leading shares indices across Asia and Europe rose as brief but positive statements appeared to encourage investors. As American officials prepared to depart Beijing, hopes were raised that the world’s two largest economies could draw a line under their acrimonious dispute and reach a deal.
Britain's steady growth to beat Europe's big players
Britain will grow at least as fast as its biggest eurozone neighbours over the next two years as a sharp economic slowdown in the single currency bloc drags on global growth, the International Monetary Fund has said.
The emerging markets set for global domination
By 2050 these emerging markets will dominate global GDP rankings, according to PricewaterhouseCoopers (PWC), a professional services group.At our recent monthly Reeves Investment Team meeting, we discussed the future prospects for the Emerging Markets sector and specific funds for possible inclusion in our model investment portfolios. Those options are still being considered and researched by the Reeves Investment Team, before any definitive action is taken.
Amazon takes title of world's biggest company for first time
Amazon was crowned the world’s most valuable public company this week, a milestone reached only 25 years after Jeff Bezos had founded the e commerce giant in his garage. Amazon’s market capitalisation is around $797 billion, pushing it past Microsoft, the former No 1, which was worth approximately $784 billion.
Our clients' holdings in the Scottish Mortgage Investment Trust has a 9.7% proportionate exposure to Amazon. The Scottish Mortgage Investment Trust share price is recovering from a recent market-driven slide.
Rate rises hang in the balance as inflation hits two-year low
Inflation has tumbled to its lowest level in nearly two years and is now running a whisker above the Bank of England’s 2% target, putting further rises in interest rates in doubt. In the event of a no-deal Brexit, markets are expecting rate cuts, ignoring warnings from Bank governor Mark Carney and other MPC members that interest rates could have to go up to 5.5% as inflation soars as high as 6%.
Share yields jump as markets slide
Yields on UK shares have risen to their highest level since the credit crunch after companies paid out record dividends as markets fell. A share’s yield is the dividend expressed as a percentage of the share price. So the yield goes up when the dividend rises or the share price falls, or both. Companies are holding back on expansion plans, nervous of the political turmoil at home and the stuttering of the world’s larger economies. The consequence is healthier balance sheets and increased dividend payments to investors.
The UK stock market's sombre mood matched the weather last week, as the FTSE 100 index of leading shares marched slowly but steadily downwards. The FTSE 100 159 points to finish the week at 6,809.22 after disappointing results from Metro bank and a drop in third- quarter earnings at vodaphone.
How the Footsie has performed:
- -10.6% over a year (down 6.6% with dividends)
- +15.9% over three years (up 31% with dividends)
- +2.2% over five years (up 24.1% with dividends)
- +68% over 10 years (up 14.5% with dividends)
Following our recent monthly Reeves Investment Team meeting, we remain somewhat cautious, whilst the recent market rally since Boxing Day is provided some welcome relief to our model investment portfolios.
It is important that no actions should be taken without first taking advice. Personal circumstances and an individual’s appetite for risk means that the advice for one person may not be the same for everyone. Please remember that the value of your investment can go down as well as up, and may be worth less than you paid in. Information is based on our understanding at January 2019.