A brief insight into the latest market dynamics and details of any changes occurring within our model portfolios.
The ECB made an announcement on Thursday that it will begin to taper its €60bn monthly quantitative easing programme to €30bn, at the beginning of January 2018 until September 2018. ECB president Mario Draghi also announced that inflation figures (currently 1.5% and below the central bank’s target of 2%) are expected to “temporarily decline towards the end of the year” due to increasing energy prices. As a result, the Euro went into a decline.
In other news, the UK’s Q3 GDP figures were released on Wednesday. They showed GDP growth of 0.4% between July and September, compared to 0.3% growth in the first two quarters. This further raises expectations of an interest-rate rise when the Monetary Policy Committee meets to make a decision on the 2nd November. However, despite the recent rise in inflation and GDP growth, some sceptics believe interest rates will not be increased due to UK earnings falling for the first time in three years. The Office of National Statistics (ONS) stated that although wages rose by 2.2% in the year, inflation rose by more and therefore eroded any gains, meaning real wages fell by 0.4% in the year to April 2017.
Important news from Asia this week came from the two superpowers with Japan re-electing Prime Minister Shinzo Abe, causing the Toppix to rise 2% – its highest point for two decades. At the 19th China Communist Party Congress, voting preserved Xi Jinping’s name and ideology into its constitution under the phrase ‘Xi Jinping’s thought’. What this suggests is much greater stability and predictability in Asia, which provides favourable investment conditions.
Gary’s market comments in conjunction with our investment partners
As LGT Vestra now have evidence of stable and long-term succession planning from the Chinese Communist Party and with the recent success in transitioning the country from a manufacturing-based to service led economy, this gives further confidence in investing. LGT Vestra are therefore looking to include direct exposure to Chinese equities in the higher risk portfolios over the next few months.
7IM’s holding in Japanese equities has been performing well in October, seeing growth of over 4% since the start of the month. The increase has been driven by an improving domestic economy and President Abe’s recent election victory. The market expects the business-friendly policies, or ‘Abenomics’, to continue now that his Liberal Democrat Party (LDP), is in a position of strength. Currently 7IM have a 6% holding in their Balanced portfolio after increasing their weighting following the last Tactical Asset Allocation process.
Sources: LGT Vestra and 7IM