Market Review January 2019: New Year, New Markets…

Despite a rocky start over fears of a slowdown in China, world stock markets enjoyed a good month as all major markets were up in January.

The positive momentum experienced at the beginning of 2019 is a much needed change of sentiment for the markets which despite the continued global growth expectation (as shown below) was held down by a cloud of negative investor sentiment for much of 2018. As can be seen from the chart below, based on a recent study by the OECD, all countries included in the global forecast are set to achieve accelerating or slowing growth in 2020, a positive sign with no countries expected to contract.

UK

The big story in the UK was, of course, Brexit, and as so often seems to have happened with the Brexit section of this commentary, all the main news was reserved for the last few days of the month.

Having suffered the heaviest defeat ever inflicted on a government party on 15thJanuary, Theresa May returned to the Commons with ‘Plan B’ – which looked remarkably like ‘Plan A’ – on 29th January. The difference this time was that the Commons was now voting on an amendment proposed by Conservative Sir Graham Brady, which sought to give the Prime Minister a mandate to go back to Brussels and re-open the Withdrawal Agreement, specifically with regard to the Irish Backstop. The proposal was passed by 317 votes to 301.

So where does that leave us? It leaves Theresa May having to go back to Brussels to try and re-negotiate a deal which, only a few weeks ago, she was hailing as not just the best deal but the ‘only possible deal’.

Another month has therefore been and gone and we are no nearer a resolution – with now less than two months to go until the UK is due to leave the European Union. Let’s see what February brings.

Away from Brexit, Christmas trading figures were released, with Aldi and Lidl once again the winners in the supermarket category, with two-thirds of British shoppers visiting one of the discounters over the holiday period.

Elsewhere, Gregg’s, Britain’s biggest chain of bakers, spurred on by the controversial vegan sausage roll reported bumper Christmas trading figures and lifted their profit forecast for the third time in a year.

From an economic perspective, the latest set of reported numbers look reassuringly positive. The latest wages figures showed an annual growth rate of 3.4% – well ahead of the 2.1% rate of inflation. There was also good news on the rate of unemployment with 328,000 more people in work compared to a year ago.

The FTSE 100 started the year in an optimistic mood, and closed January up 4% at 6,969 and closed on February 11that 7,134 . The pound was also up, rising 3% against the dollar to close the month at $1.3105.

Europe

Despite the continued march of the gilets jaunes (yellow vests) the French economy beat expectations (and the protests) to grow by 0.3% in the fourth quarter of 2018. Much like any political statement these days, the yellow vests now face opposition from the newly formed foulards rouge (red scarves) – seemingly a middle-class movement supporting the Republic and its institutions.

From an index point of view, the German DAX index led the way, up 6% in January to 11,173. The French stock market rose by a similar amount, closing January at 4,993.

US

US jobs growth for December was well ahead of expectations, with the economy adding 312,000 jobs, compared to estimates of around 180,000. Normally this would lead to inflationary pressures, but December saw the first fall in US inflation since March 2018, as it dropped to 1.9% thanks to cheaper fuel prices.

There was yet another illustration of the shift from bricks to clicks as Amazon became the world’s most valuable company, and Sears – so long the mainstay of the American shopping mall – teetered on the edge of liquidation.

For most of January the deadlock between the President and the Democrats led to the longest Government shutdown on record. It was finally resolved at the end of the month, just as a polar vortex brought some of the worst weather and lowest temperatures ‘in a generation’ to the US. That will, inevitably, impact on economic activity.

But despite the shutdown and record low temperatures, January ended as a good month for Wall Street, with the Dow Jones index rising 7% to close the month at 24,999.67.

Far East

Figures for Chinese growth in 2018 were released and confirmed at 6.6%. Looking ahead to 2019, China expect growth to be in an ‘appropriate range’ with most commentators taking this to mean a figure of around 6.3%. While this would give China its lowest annual growth for 25 years it was almost inevitable that the rate of growth would slow, still, what would Europe give for growth at even half of that expected by China in 2019?

The markets in China and Japan both rose by 4%, while the Hong Kong and South Korean stock markets were up by 8%. China’s Shanghai Composite index ended the month at 2,585 and Japan’s Nikkei Dow was at 20,773, while Hong Kong closed at 27,942 and South Korea at 2,205.

Emerging Markets

In Brazil, new President Jair Bolsonaro was sworn in on New Year’s Day and immediately declared the country’s ‘liberation from socialism’. There is no doubt that the man dubbed the ‘Trump of the Tropics’ is going to pursue policies that are favourable to business. Environmental campaigners worry how this might impact the rainforest and several rich eco-systems in Brazil but, in January at least, it was business that held sway as the Brazilian stock market rose 11% to end the month at 97,394.

In keeping with every other major market both the Russian and Indian stock markets also rose in the month, respectively finishing up 6% and 1% at 2,521 and 36,257.

And finally…

Last but not least, some good news in the war for jobs as concerns grow about the threat to human jobs caused by AI and robotics.

The world’s first “robot hotel” in Japan, where guests are met by a dino-bot (yes, a dinosaur robot) and where room service bots roam the halls, has fired over half of its robot workforceand replaced them with humans because the bots were ‘irritating and incompetent’. The Siri-like virtual assistants couldn’t answer any questions, the room service bots were being triggered off by guests snoring and the robo-receptionists couldn’t photocopy passports.

There is hope for us humans yet…

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The information contained in this article is intended solely for information purposes only and does not constitute advice.  While every attempt has been made to ensure that the information contained on this article has been obtained from reliable sources, Vizion Wealth is not responsible for any errors or omissions. In no event will Vizion Wealth be liable to the reader or anyone else for any decision made or action taken in reliance on the information provided in this article.

Posted by Andrew Flowers

Andrew is the managing partner of Vizion Wealth and has been involved in the offshore and onshore financial services industry for over 18 years. Andrew was the driving force behind Vizion Wealth after years of experience in a number of advisory roles within high profile wealth management, private banking and independent financial advisory firms in the UK.

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