STOCK MARKETS IN 2019

Stock markets across the globe bounced back in the first half of January after experiencing a disappointing finish to 2018, a year in which volatility dominated the headlines. This market update looks at what’s driving current market behaviour and why experts at Royal London believe that investing in a diversified mix of investments is best for your long term savings.

CURRENT MARKETS
January is proving to be a positive month for stock markets, with the S&P 500 in the US gaining over 4% in the first two weeks of trading, boosted by the performance of the FANG stocks (Facebook, Amazon, Netflix and Google) in particular. Looking closer to home, the FTSE 100 performed strongly, returning just under 2% in the first two trading weeks of January.

So what’s causing the change in market sentiment since the volatility of December? While we don’t seem to be any closer to having a clear picture of the Brexit outcome, tensions between the US and China seem to have softened slightly, and a number of US companies have recently reported results ahead of expectations.

OUR VIEW
The market is predicting a low level of growth, but we do believe there are some reasons for positivity. We begin the year supportive of stocks, however we do expect to become more cautious as the year progresses. The US labour market remains strong and there appears to have been a toning down of rhetoric from the Trump administration with regards to the US-China trade dispute, although whether or not this leads to a new trade agreement remains to be seen. The main risks still come from Brexit uncertainty in the UK, the possibility of an escalation in the trade tensions between US and Chinese delegates, in addition to the US central bank raising interest rates in line with an economic slowdown.

The outcome with regards to Brexit remains very uncertain, with Theresa May’s Brexit proposal having been unceremoniously rejected by parliament. So what happens next? The default position remains a no-deal Brexit, with the UK scheduled to leave the EU on the 29th March, with or without a trade arrangement in place.