A brief insight into the latest market dynamics and details of any changes occurring within our model portfolios.
Market data
Brexit negotiations continue in a confused state and businesses across the UK are hoping that some clarity develops in understanding the way forward so that investment decisions can be made.
Significant UK data released this week, included:
- The Consumer Price Index (CPI), increased to 3%. A figure not seen since April 2012
- UK unemployment fell by 52,000 in the three months to August with the jobless rate unchanged at 4.3%
- Retail sales fell 0.8% in September bringing a year on year rate to 1.5% (the lowest figure for over 4 years)
These conflicting reports therefore bring uncertainty to the predicted rate rise in November, especially following recent news concerning the levels of debt within the UK.
Globally, markets continue to push on, buoyed by the confidence on Wall Street which continues to set new record highs.
30 years ago, on 19th October 1987 during ‘Black Monday’, the FTSE100, experienced a 10.84% fall followed by a 12.22% fall on the Tuesday. The FTSE100’s greatest percentage fall. Thankfully, and thirty years on, the IMF has revised upwards its forecast for the global economy with predictions of 3.6% for 2017 and 3.7% for 2018.
Gary’s market comments in conjunction with our investment partners
ARE FRENCH REFORMS FOR REAL
Six months ago, the young president Macron was elected on a wave of optimism. Despite an initial drop in popularity, this is now on the increase with the introduction of labour market reforms and a likely reduction in corporation tax.
Macron’s closer ties with international allies including Angela Merkel should also create a more efficient Franco-German partnership and greater financial, economic and political integration.
These reforms and altered outlook could be viewed as the start of both genuine and profound economic change in France.
PORTFOLIO ACTIONS
A fortnight ago, 7IM discussed the changes that were being made to their equity holdings, which centred around their investments in Frontier Markets. The reasons for these changes were as follows:
- Frontier markets offer a broad and diverse range of stocks that have the opportunity to benefit from structural changes both economically and politically
- They offer better growth potential than developed markets due to the nature of their underlying economies
- Price inefficiencies still persist in these markets
- Local investors have an advantage over large, global players which 7IM can access without creating issues for market liquidity
- These markets tend to be less likely to move in the same direction as developed markets, offering up diversification benefits for global portfolios.
Sources: LGT Vestra and 7IM
