Quarterly Market Commentary

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Quarterly Market Commentary

Major Global Events

Global equities posted sharp declines due to fears over global trade and the impact this could have on global growth.

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

UK

UK GDP rebounds in the third quarter. GDP data is released with a lag so we found out about the Q3 rebound in December. The quarterly growth rate was the highest since 2016 and marked a considerable step up after the weak UK growth reported in the first half of 2018.

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"Know what you own, and know why you own it." - Peter Lynch

US

US Federal Reserve (FED) increased interest rates again by 0.25% during the period, bringing the FED funds rate to an upper limit of 2.5%. It capped a total of 4 hikes over the course of the year, which was a slight acceleration relative to 2017 where we saw 3 hikes, and markedly faster than 2015 and 2016 that only saw 1 hike each.

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"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffett

Eurozone

Economic activity data continues to disappoint as PMIs surprise to the downside. Purchasing Manager Indices (PMIs) are leading indicators of economic health and they were deteriorating in Europe throughout 2018. The last reading in December was the lowest level seen by the manufacturing sector since 2016, and lowest for the services sector since 2014.

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"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." -- George Soros

Emerging Markets

Latin America outperforms amidst political upheaval, following the election of very different Presidents in Mexico and Brazil. Brazil led Latin American equities higher, posting returns in excess of 10% during the period, as markets cheered the inauguration off new President, Jair Bolsonaro.

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"An investor without investment objectives is like a traveller without a destination." - Ralph Seger

Japan

Bank of Japan monetary policy remains unchanged. Bank Governor Kuroda signalled that their ultra-loose monetary policy would continue, given they are still a long way off achieving their target of 2% inflation.

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“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” - Paul Samuelson

Commodities

Oil price plunges on supply boost. As the price of oil squeezed higher throughout the first 9 months of the 2018, the Organisation of the Petroleum Exporting Countries (OPEC) responded rationally - by increasing their supply of oil, in order to prevent the price getting too high. Unintentionally, the execution of this coincided with an increase in supply by the US shale producers (non-OPEC).

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“It’s not your salary that makes you rich, it’s your spending habits.” –Charles Jaffe