Market Outlook Report – February 2019

Market Overview

February 2019 

Wall Street's best January for 32 years 
Wall Street completed its best January since 1987 as stocks continued their recovery from a sharp sell-off in December.

The US Federal Reserve’s indication on Wednesday that it would not raise interest rates this year helped to extend January’s gains, with the S&P 500 index of America’s leading companies up by 0.9 per cent, or 23.05 points, to close at 2,704.10, giving it a monthly gain of 7.9 per cent, its best January percentage rise in 32 years.

Relevance/ Impact 

Risk is paying off for those who give up on gilts and yield to shares
Buoyant dividend growth and falling share prices have pushed the yield on UK shares to 4.4 per cent. Further dividend growth is likely this year — not despite economic uncertainty, but because of it.

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.

Relevance/ Impact 

Why you should sink your teeth into 'FAANG' stocks 
The past few months have been turbulent for the five technology giants known as the FAANG stocks — Facebook, Apple, Amazon, Netflix and Google (owned by Alphabet).  After trebling in value between early 2015 and mid-2018, when it briefly broke the 3,000 barrier, the FAANG index of technology stocks slumped almost 1,000 points to just above 2,000 in December, before again surpassing 2,500.

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Targeted Absolute Return Funds 
Targeted Absolute return funds are billed as the ideal place for investors to park their money in the face of stock market turmoil. Yet a study by AJ Bell, an investment platform, shows that these funds, which aim to provide positive returns in all market conditions, and which hold more than £72 billion of investors’ money, are not living up to their promise.

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*This information was sourced from The Times, January 25th, 2019 5:00pm
https://www.thetimes.co.uk/past-six-days/2019-01-26/money/funds-that-are-on-the-rocks-gqks5bwmn 

£55bn of saving lie in dog funds
Almost £55 billion in savings is stuck in poor performing funds. What is more, we are paying about £537 million in fees for the privilege.

Relevance/Impact

Dividends reach record high 
Dividend payments by the world’s largest companies hit a record $1.37 trillion last year, equivalent to the gross domestic product of medium-sized economies such as Mexico or Australia.  Dividends to shareholders grew by 9.3 per cent year-on-year in 2018.

The latest surge was because of a recovery in the prices of energy and raw materials, which boosted oil companies and miners.  The study found that the return of more banks paying dividends was also a factor, as were corporation tax cuts in the United States.

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This article is in the opinion of Reeves Independent financial advisers only and is not intended as advice and no investment decisions. The information in this blog or any response to comments should not be regarded as final advice. 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 February 2019.