Market Outlook Report – November 2018

Market Overview

November 2018

Outlook is worst since the crash, say bosses
The chancellor has suffered his first big setback since the budget as it emerged that confidence among businesses had slumped to its lowest level since the financial crisis.

According to the Business Confidence Monitor survey from the ICAEW, the accountancy body for England and Wales, confidence among businesses is in negative territory in every region and almost every sector of industry in Britain, despite figures showing that sales are rising and are expected to remain buoyant over the next year.

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Investor sentiment sours for UK equities as Brexit looms
Britain is the least liked region for equity investors while the US is the most preferred, new research has found.

Bank of America Merrill Lynch said the UK endures the “worst sentiment of all regions” in its latest global fund managers’ survey. Germany and Spain are this month’s most favoured European destinations for investors, with a net positivity rating of 16 per cent.

The most bearish forecasts were for China, with 54 per cent predicting a slowdown next year.  The US is the most favoured equity region for fund managers.

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Growth in eurozone is stalling
Economic growth in the eurozone slowed sharply in the third quarter to levels last seen more than four years ago.

Figures from Eurostat, the European Union’s statistics agency, said that gross domestic product for the 19-strong bloc had risen by 0.2 per cent from the end of June, against expectations of 0.4 per cent. It was the slowest rate of growth since the first three months of 2013.

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City traders bet on interest rate freeze amid Brexit turmoil
Brexit chaos is set to halt the Bank of England’s rate rise plans, investors are betting.  Markets are not pricing in the next increase in interest rates until January 2020, following sharp moves in derivatives contracts linked to future borrowing costs.

Traders were expecting at least one rise from 0.75% to 1.0% next year — with a possibility of further increases — but have scaled back their bets after a series of resignations over Theresa May’s Brexit deal plunged the prime minister into a political crisis last week. 

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Don’t rush to buy back in, JP Morgan tells investors
It is still “too early” to invest in domestic British stocks such as banks, housebuilders, retailers and property companies, analysts at JP Morgan warned this month.

JP Morgan said that investors should hold off buying back into domestic stocks.  Its analysts argued that even if Britain did agree a deal with the European Union, the likelihood of it passing in the House of Commons initially looked slim.

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UK shares have been unloved since the referendum, while international stocks have prospered.
The Brexit vote in June 2016 didn’t just divide the nation, it split the FTSE 100 index of leading shares right down the middle.

The market’s fears that Brexit will damage the UK economy have driven down the value of the pound and thus boosted the sterling value of global stocks’ overseas earnings, while at the same time depressing the valuation of domestic shares.

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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 November 2018.