Major Global Events

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Major Global Events

Global Market Returns                        Q4            LTM

MSCI World Equity Index                 - 13.4%       - 8.7%

MSCI Emerging Market Index           - 7.4%      - 10.1%

BB Global Aggregate Bond Index        1.3%          0.1%

Summary

  • The Brexit debacle shows no sign of abating
  • US-China trade war weighs on confidence
  • China steps up stimulus as economy slows
  • Global equities posted sharp declines

The Brexit debacle plaguing UK politics shows no sign of abating. It seemed that a significant hurdle had been overcome after the EU declared support for Prime Minister May’s Withdrawal Agreement. However, following the resignation of some of her ministers, and widespread opposition to the Northern Irish Backstop proposals, May delayed a vote on it in Parliament until the new year due to expectations of an overwhelming defeat.

The US-China trade war begins to weigh on confidence as a resolution remains elusive. The US has imposed $200bn worth of tariffs on Chinese imports since the trade war began last year. China has retaliated with $60bn of counter tariffs but the US had been threatening to up the ante, with an additional $267bn to be imposed in December. Some good news came late in the year when the US agreed on a 90-day delay to these additional tariffs. A lot of damage had already been felt however with market confidence severely dented.

China steps up its stimulus measures as economic activity slows. Historically, China’s economic growth has been fuelled by infrastructure spending on a gargantuan scale. However, since the large stimulus measures of 2016, policy makers have actually been clamping down on lending, which has had a tightening effect on the economy. As more and more signs of a slowing Chinese economy have developed, speculation has been growing as to what, if any, stimulus measures China will implement. We saw small but more numerous, and hence positive, policies enacted towards the end of the year which should provide support in 2019.

Global equities posted sharp declines due to fears over global trade and the impact this could have on global growth. There were few places to hide as all major equity markets fell. Equity volatility also increased sharply as we saw some large single-day moves both up and down. Government bond yields fell meaning that they generated a small, but nevertheless positive, return over the period.

"It is not the strongest or the most intelligent who will survive, but those who can best manage change.” - Leon C. Megginson