Major Global Events
Global Market Returns Q1 LTM
MSCI World Equity Index 12.6% 6.7%
MSCI Emerging Market Index 9.8% - 1.9%
BB Global Aggregate Bond Index 2.2% - 0.4%
- Brexit dominates UK headlines
- US-China trade talks progressing
- FED pivots to easier policy
- Global equities rally sharply as sentiment turns
UK’s departure from the European Union continued to dominate UK headlines in the first quarter. The UK parliament rejected Prime Minister May’s withdrawal agreement for the third time and consequently the UK failed to leave the EU on the March 29th exit date. Parliament subsequently rejected all alternatives to the Prime Minister’s deal forcing the government to seek an extension from EU leaders, until the 30th October. The political impasse therefore continues. Meanwhile, the UK economy continues to grow, unemployment continues to fall and real disposable incomes continue to rise supporting the UK economy. UK government borrowing hit a 17-year low in the last financial year providing scope to stimulate the economy in the event of a disruptive Brexit.
US-China trade talks progressing with resolution expected. The US administration were targeting May 10th to announce a deal that President Trump and Chinese President Xi Jinping would sign later at an official summit. The decision to delay any announcement on tariffs until April suggests a bilateral agreement is on the horizon although the details still have to be finalised. Agreement has been reached on stricter enforcement of international trade protocols and China is expected to pass legislation protecting foreign intellectual property rights. The stakes are high and both sides need a deal, however given the unpredictability of President Trump, there will inevitably be difficult moments for markets to contend with until the deal is finally settled.
The US Federal Reserve (FED) continued its pivot toward less restrictive monetary policy. The projection for US interest rates were revised lower, shifting to no interest rate hikes this year and just one in 2020. This compares to a projection of two hikes in 2019 and one in 2020. The Fed’s policy shift has helped push down yields on US government bonds and improve global financial conditions.
Global equity markets saw their largest quarterly gains since 2010. Markets were buoyed by signs of progress in US-China trade talks and major central banks grew more accommodative leading to a material positive shift in investor sentiment at the turn of the year. The rally was further fuelled by increasing stimulus by the Chinese government and a pick-up in growth metrics in Europe and China. The easier monetary conditions, improving confidence and less disruptive politics should support markets for remainder of the year, however volatility is likely to remain elevated until trade dispute is resolved.
"Too many people spend money they earned..to buy things they don't want..to impress people that they don't like." --Will Rogers