With thanks to David (DAN) Norman of TCF Investments, we would like to share his market overview covering the period October to December 2018.
Q4 was a very negative quarter for investors; the declines in this quarter largely wiped out all of the previous gains in 2018.
Overall the global expansion continues but many major economies are showing results suggesting they are reaching the more advances stages of the business cycle. Global manufacturing activity continues to expand but at a slower pace. Fortunately for the rest of the world, the risk of a recession in the US appears to be low.
A major issue for the world is China’s industrial sector is weaker than forecast and the Chinese authorities will be forced to take action. Given the high debt levels in China, this is going to be a delicate process. The situation is made more difficult by the ongoing trade conflict with the US. Nevertheless, if the Chinese authorities can address the current problems China’s growth rate is forecast to be around 6%.
In the UK, the FT All Share fell by -10.2% in the quarter, leaving it down by -9.5% over the course of the year. In Sterling terms the US market was down -11.5% in Q4, leaving a small positive return of +1.6% for the year; whilst in Japan the Topix returned -12.7% in Q4 and was down -8.4% for the year. Europe was similar with a Q4 return of -11.0% and a negative return of -9.1% for the year. Emerging markets were down by -3.9%, giving a 12 month return of -7.6%.
Bonds had been performing poorly in 2018 before the last quarter, but the positive returns in Q4 helped the overall position for the year. Gilts (a bond issued by HM Government) returned +1.9% in Q4, creating a small positive return of +0.6% for the year. Meanwhile Corporate bonds were down -0.2% in Q4, with an overall loss of -2.2% in 2018.
With growth slowing, ongoing Brexit concerns and uncertainties, volatility in markets in the next quarter is likely to be continue to be high. However, global economic growth is likely to continue in 2019 albeit at slower rates. Overall returns are likely to be modest in 2019.
We hope this short update is useful. Should you wish to discuss the potential impact on your investment portfolio then please do not hesitate to get in touch on 0800 043 8341 and we will be happy to discuss.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance. This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action. Tax regulations can change and any figures quoted above are at the date of publication.