Please find below our Market Update for the week ending 31st August 2018.
A brief insight into the latest market dynamics and details of any changes occurring within our model portfolios.
Market data
Continuing the theme from last week’s update, the US economy and stock market remains in rude health. Economic growth for Q2 has been revised slightly upward to 4.2% which surprised most analyst’s views. The news was well received, and this was no exception with the main US markets forging further ahead. Amazon remains a bellwether for this growth with its shares were up nearly 4% this week and in touching distance of becoming the second company, after Apple, to achieve a total worth of over $1 trillion dollars!
The last quarter in the US was the best economic performance for 4 years and whilst it is reasonable to expect growth to moderate, it is still expected to be strong and the envy of many countries. The next big issue is the direction for US interest rates which had been widely expected to rise again, perhaps twice, this year, though following President Trump’s intervention to restrict increases, the FED Chairman spoke less positively on the prospect of quick rises.
In the UK much was said about Brexit but in all reality, we are no further forward though significant effort is being made to find a good outcome for all. It is interesting to see Theresa May’s efforts this week to seek trade agreements in Africa. This is both seen as highlighting the potential for our post Brexit economic success and at the same time drawing EU attention to the need to agree a deal with us. You will see below that 7IM are forecasting the most likely outcome in their view is for a continuation of the negotiations beyond the initial deadline with some form of political accord to allow this.
Amongst other mixed news from the UK this week, was confirmation that the number of households without anyone in employment is at its lowest for over 20 years. Less positive news was that the number of new mortgages agreed is 4% lower than a year ago.
In Europe one of the more interesting updates was the release of the Central Bank’s meeting notes from the end of July which followed their earlier assertion that they would stop their asset purchase scheme (quantitative easing). The meeting notes suggested that with patchy growth across the Continent the scheme may not end after all and so interest rates may not need to rise as quickly as at first thought which is often good news for share prices. Whilst this news can be viewed in number of ways, overall, this shows that policy makers are prepared to do what is necessary to keep Eurozone economies in the best shape.
Emerging Markets remain very mixed in sentiment with the latest news that Argentina is seeking a $50bn loan from the International Monetary Fund to avert an economic crisis. This follows on from bad news in Turkey in the last few weeks. In contrast, following news of a trade agreement with the United States, Mexico’s market surged.
The strength of the US dollar, of late, however, has not generally helped Emerging Markets. LGT Vestra, though, have said that with falls in the valuation of many of these countries we could see some good value buying opportunities in the short term.
Blue Sky’s market comments in conjunction with our investment partners
Continuing the theme from last week’s update, the US economy and stock market remains in rude health. Economic growth for Q2 has been revised slightly upward to 4.2% which surprised most analyst’s views. The news was well received, and this was no exception with the main US markets forging further ahead. Amazon remains a bellwether for this growth with its shares were up nearly 4% this week and in touching distance of becoming the second company, after Apple, to achieve a total worth of over $1 trillion dollars!
The last quarter in the US was the best economic performance for 4 years and whilst it is reasonable to expect growth to moderate, it is still expected to be strong and the envy of many countries. The next big issue is the direction for US interest rates which had been widely expected to rise again, perhaps twice, this year, though following President Trump’s intervention to restrict increases, the FED Chairman spoke less positively on the prospect of quick rises.
In the UK much was said about Brexit but in all reality, we are no further forward though significant effort is being made to find a good outcome for all. It is interesting to see Theresa May’s efforts this week to seek trade agreements in Africa. This is both seen as highlighting the potential for our post Brexit economic success and at the same time drawing EU attention to the need to agree a deal with us. You will see below that 7IM are forecasting the most likely outcome in their view is for a continuation of the negotiations beyond the initial deadline with some form of political accord to allow this.
Amongst other mixed news from the UK this week, was confirmation that the number of households without anyone in employment is at its lowest for over 20 years. Less positive news was that the number of new mortgages agreed is 4% lower than a year ago.
In Europe one of the more interesting updates was the release of the Central Bank’s meeting notes from the end of July which followed their earlier assertion that they would stop their asset purchase scheme (quantitative easing). The meeting notes suggested that with patchy growth across the Continent the scheme may not end after all and so interest rates may not need to rise as quickly as at first thought which is often good news for share prices. Whilst this news can be viewed in number of ways, overall, this shows that policy makers are prepared to do what is necessary to keep Eurozone economies in the best shape.
Emerging Markets remain very mixed in sentiment with the latest news that Argentina is seeking a $50bn loan from the International Monetary Fund to avert an economic crisis. This follows on from bad news in Turkey in the last few weeks. In contrast, following news of a trade agreement with the United States, Mexico’s market surged.
The strength of the US dollar, of late, however, has not generally helped Emerging Markets. LGT Vestra, though, have said that with falls in the valuation of many of these countries we could see some good value buying opportunities in the short term.
With Brexit discussions ongoing amid more talk of a ‘no deal’ outcome, the 7IM team have considered what they see as the 3 potential options;
Firstly, a 75% chance of the Government ‘kicking the can down the road’, secondly, a 20% chance of a ‘no deal’ and finally, a 5% chance of a ‘shock remain’ scenario.
In each case 7IM have assessed how they feel the FTSE and Sterling would react and are consequently ready to act in investor’s best interest. 7IM’s view is that they should ignore the short-term noise surrounding Brexit and instead ensure that they remain globally diversified with a third of their Balanced portfolios (as an example) allocated to non-sterling holdings.
Sources: LGT Vestra and 7IM
