May Market View

Donald Trump went on the offensive during the most recent round of trade talks with China. As is becoming the norm, he fired off a number of tweets attacking their stance and announcing further tariffs on goods purchased from China. This on-again, off-again relationship has taken more turns than a bad US rom-com and put America’s potential trade war with China firmly back on. President Trump’s tweets spooked the market at the beginning of May but we saw signs of a recovery as he softened his stance over the next couple of weeks.

MAY, MAY, GO AWAY

Theresa May has announced her resignation as the leader of the Conservative party, however she will continue as Prime Minister until a replacement is chosen. We would expect a new Prime Minister to be in place by mid-July and, at the time of writing, the current favourites for the post are Boris Johnson and Dominic Raab. Both candidates have intimated the UK will leave the EU without a deal at the end of October if nothing can be agreed.

DEAL OR NO DEAL?

Before her resignation, Theresa May attempted to form a consensus with the Labour party on a way forward on Brexit talks. Both sides blamed the ‘weakness and instability’ of the other party as talks broke down. This, along with May’s resignation, caused the value of the pound to fall as the likelihood of leaving the EU with no-deal increased. A number of candidates with differing views on Brexit have put themselves forward to be the next leader. However, regardless of who the new Prime Minister is, we expect UK markets to remain uncertain until any agreement with the EU is reached.

OUR VIEW

The market is predicting a low level of growth, but we do believe there are some reasons for positivity. We began the year supportive of stocks; however we are becoming more cautious as the year progresses. The main risks still come from Brexit uncertainty in the UK, the potential of trade talks between the US and China collapsing completely, in addition to the US central bank raising interest rates if markets grow too quickly.

INVESTING WITH US

Our key goal is to deliver good outcomes for our customers. We do this by following our core beliefs:

• Pensions are long term investments

While it can be hard to watch large market drops, especially if the value of your savings is falling, it’s important to remember that investing for retirement is a long term game. It’s very normal for an economy to go through phases of expansion and contraction.

In fact, over the long run there is a recession every five to ten years. We think of these cycles in terms of waves of growth and inflation, and consider which investments do best when growth is strong or weak, and when inflation is falling or rising. Our investment experts analyse and understand where we are in that cycle and which types of investments we should be investing in within the portfolio mix. This is called the short term view and we do this on a day to day basis so that we can try to maximise returns and avoid some of the losses.

Falling markets can be buying opportunities, particularly when you are planning to invest for a long time period. We see the current market falls as potential buying opportunities for equities.  The multi asset portfolios are currently holding slightly more equities than average, having bought on the recent dips. We’re also holding more corporate and high yield bonds.