Market Review April 2019: Climbing the Wall of Worry

Markets continued to climb the proverbial wall of worry over April as the S&P 500was back into record-setting mode, moving past its previous all-time high set back in October 2018.

Amid a relatively quiet April in macro-economic terms, at least compared to recent Brexit-centric months, April was a month where the world initially breathed a sigh of relief as relations between the US and China continued to thaw as formal trade talks between US trade Representative Robert Lighthizer and Chinese Vice Premier Liu He began. However, they could not reach agreement resulting in US President Trump raising tariffs on $200 billion of Chinese good amid an escalating trade war.

Although the markets believe an agreement it is still possible, it still remains clear that there are issues that remain unresolved with technology likely to continue to be a major battleground as the US took a dim view of the UK Government’s decision to allow Chinese telecoms company Huawei to play a key part in building our 5G infrastructure.

Globally the IMF projected growth of 3.3% for 2019 in its latest World Economic Outlook whilst stating that the level of expansion is “reasonable” but warning that the global economy is in “a delicate moment”. April ended with Norwegian authorities claiming that a beluga whale found with a ‘harness’ by local fishermen had been trained by the Russian navy – a reminder that while stock markets may rise and fall, global tensions will always be with us.

UK

In what was a busy month for the UK high street, Tesco lifted its dividend to shareholders as profits rose 30% whilst Primark saw adjusted operating profit jump 25% in the six-month period ending 2ndMarch.

Away from the shops, UK factories saw manufacturing hit a 13-month high with unemployment falling to its lowest level in 44 years. Perhaps the most encouraging news came from the Organisation for Economic Cooperation and Development (OECD) which confirmed that the UK is the leading destination for foreign investment in Europe, and the third most significant in the world behind the US and China.

So, was the FTSE-100 cheered by this news? Yes it was. The FTSE ended April up 2% at 7,418. The pound was virtually unchanged against the dollar, and closed the month at $1.3041.

Europe

The major European stock markets enjoyed good months in April, but look below the surface and the month which brought the Notre Dame fire also brought some worrying signs for the French and German economies.

French President Emmanuel Macron has finally agreed to cut taxes in response to the Yellow Vest protests but, worryingly, France is very firmly on course to overtake Italy as the world’s fourth most indebted country, with its public debt now just a whisker behind its southern neighbour.

Meanwhile the forecast for German growth in 2019 has been slashed to just 0.5% – roughly a quarter of the level the German Government was predicting a year ago as Europe’s car crisis continues to worsen in the face of driverless vehicles and the end of the internal combustion engine.

On the political front, Spain held its third election in four years, which resulted in victory for the Socialist party of Prime Minister Pedro Sanchez, however they only polled 29% and will need partners to form an effective coalition government.

Away from the ballot box and on the stock markets the German DAX index was up 7% in April to end the month at 12,344. The French stock market was up by 4% to 5,586.

US

April in the US got off to what now seems to be a normal start to the month, as Facebook reported another ‘data breach.’ Only ‘millions of user records’ though, so nothing to worry about.

In the wider US economy, the month had got off to a good start as 196,000 jobs were added in March – ahead of expectations and well up on the disappointing 33,000 jobs in February. There was more good news later in the month as the US trade deficit continued to shrink as exports to China rose, and it was confirmed that the US economy had grown more quickly than expected in the first quarter of the year, growing at an annualised rate of 3.2% which was well ahead of analysts’ forecasts.

On Wall Street the Dow Jones index enjoyed a good month, rising by 3% to close April at 26,593. All eyes now turn to the eagerly-awaited stock market debut of Uber, which will begin trading in May. Expectations are that the company will be valued at around $90bn (approximately £70bn) although the company is now warning that it ‘may never make a profit.’

Far East

April got off to a good start in the Far East with the news that Chinese factory output had picked up in March, perhaps reflecting the steps which the Chinese Government had previously taken to boost the economy.

The Chinese equivalent of our Purchasing Managers’ Index rose to 50.8 in March from 49.9 in February – with any figure above 50 indicating that the economy is expanding. Official manufacturing figures also pointed to a jump in activity, and the positive news was confirmed  mid-month as figures showed that the Chinese economy had grown by 6.4% in the first three months of the year, ahead of expectations of 6.3%.

Despite all this China’s Shanghai Composite index was the one market that barely moved during April, in fact It dropped back 13 points to 3,078. There was though, more positive news from the other major Far Eastern markets with the Hong Kong index rising by 2% while the market in South Korea was up 3% to 2,204. But it was Japan’s Nikkei Dow index that led the way, posting a 5% rise to end the month at 22.259.

Emerging Markets

April saw Jumia – dubbed Nigeria’s version of Amazon – become the first tech start-up from Africa to float on Wall Street, with the company valued at $1bn (£770m).

Meanwhile voting is underway in India, the world’s largest democracy. The polls opened on 11th April and the final votes will not be cast until 19th May, with current Prime Minister Narendra Modi likely to win again. The campaign has been dominated by jobs, as India’s unemployment rate continues to rise: some estimates suggest that the country needs to create 8-10m new jobs a year to tackle the problem. Whether this is possible in an age of AI and increasing automation is open to debate.

As far as their stock markets went, all three major Emerging Markets saw very slight gains in April. Both the Indian and Brazilian markets rose by 1% to 39,032 and 96,353 respectively. The Russian market was up by 2%, closing the month at 2,559.

And finally

In news that will have parents up and down the land jumping for joy, a Japanese firm has showcased its fully autonomous robot that can tidy a child’s bedroom.

Whilst it is acknowledged that robots are good at repetitive jobs – welding a car chassis or packaging a product, one area robots have tended to struggle with is dealing with patterns that are not orderly; and what could be more disorderly than a child’s bedroom?

Well, in a basement in Tokyo, a tech start-up is trying to fix that shortcoming. Preferred Networks are applying machine learning and AI to ‘disorderly situations.’ Essentially, they are building on the same technology that is used in driverless cars to navigate around the home, identifying and picking up various objects littered on the floor and putting them back where they’re supposed to go. As we’ve seen previously with the dino-bot hotel, not all great Japanese ideas work when put into practice….. we can only hope that Preferred Networks get this one right!

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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 Jon Hill

Jon is the Investment Manager at Vizion Wealth as well as being Andrew's direct support. With over 6 years of investment management experience, Jon provides market overview and investment insight to the Vizion Wealth advisers. Jon is a qualified Investment Manager, as well as being a Diploma qualified financial planner having previously worked in a financial advisory support role.

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