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5. June 2017 21:37
by Irene
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May 2017 - Market Commentary

5. June 2017 21:37 by Irene | 0 Comments

Another month laden with politics and elections on the news front. President Macron’s win in France was greeted well by the market and brought on what might be best described as a risk-on environment in Europe. In the UK the pre-election mood had been heating up and with it an increase in uncertainty on who will win the election. Sterling continued its rally at the beginning of the month, but was down later on with the news on a tighter outcome as suggested by opinion polls and ended the month down -0.5% against the Dollar. Developed Markets Equities (MSCI World) returned 2.1% in May in USD (2.7% in GBP).

United Kingdom

The markets looked quite rosy at the beginning of May when polls showed a comfortable lead for the Conservatives in the June election. When that majority began to tighten later on in the month, Sterling weakened somewhat, but the FTSE 100 still managed to rally 4.9% for the month. Consumer spending was reported upwards, although GDP growth was revised down as were the manufacturing and services sectors.

Europe

The Eurozone saw a good run in equities boosted by the French election outcome that did not upset the apple cart, a further decrease in the unemployment rate to 9.3%, and increase in consumer confidence. Progress on bailout talks around Greek debt did also help, with Greek equities returning 9% in EUR. On the other hand, there are concerns of a possible early election in Italy this autumn, with potentially more euro-sceptic parties winning ground.

United States

Despite the economy still waiting for Trumponomics to happen in the form of tax cuts and political stimulus, the rally in the United States continued. The US market saw a broad-based higher earnings trend, resulting in a record level of the S&P 500 at more than 2,430 and a 1.4% return for the month in USD (1.9% in GBP). The employment rate for May fell to 4.4% and an increase in the flash May PMI Composite index, pointing to continued growth.

Emerging Markets

Generally a more risk-on feeling globally was supportive for Emerging Markets with the MSCI Emerging Markets returning 3% in USD (3.6% in GBP). Eastern European equities did well amid the wider improved European outlook. At the bottom of the spectrum though were Brazilian equities with another round of corruption allegations and increased political risk. China was downgraded by Moody’s amid an increased corporate debt pile.

Fixed Income

Global bonds were stronger across the risk spectrum in May, except for inflation-linked bonds with inflation slowing down slightly in a few regions. Investment-grade and Emerging Markets bonds on average did well.

Commodities

Commodities did not fare so well in May. Brent crude was down -2.8% amid oversupply concerns and Gold was more or less flat for the month, returning 0.3%. Commodities on average produced a negative return, which in turn led to the slowing down of inflation that we had also seen filtered through for inflation-linked bonds.

Market Returns Overview

Source: Markit, Twenty20 Investments, as of 31 May 2017, all returns in GBP.

5. May 2017 21:35
by Irene
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April 2017 - Market Commentary

5. May 2017 21:35 by Irene | 0 Comments

The biggest news in April was the topic of elections – the first round of elections in France, with Macron being favoured as the winner, and Theresa May’s call for a snap election in the UK in June. "Another one? Not again!", as one lady famously commented about the news. Sterling rallied on the news of that and in total gained 3.1% for the month. That did not bode well for international assets, the prices of which are mostly down over the month in GBP, as can be seen from our main asset class returns table.

United Kingdom

Apart from the fallout with some of the members of the EU, Brexit has taken a slight back seat as negotiations will only start in earnest after the UK elections. The FTSE 100 reacted negatively to the announcement, but regained part of its losses again, though net-net it finished down -1.3% for the month. As in most months, the macro economic outlook was mixed, with the Office for National Statistics (ONS) reporting a sharp slowdown in UK growth from 0.3% for Q1 2017 versus 0.7% in Q4 2016. Retail sales also slumped, whereas in contrast the flash purchasing manufacturing index (PMI) has been up.

Europe

European equities gained in April with the Euro Stoxx 50 up 2.4% in EUR (0.9% in GBP) and was one of the few equity markets up for the month of April when converted to GBP. Markets reacted positively to the victory of Emmanuel Macron in the first round of the French presidential elections. Another positive catalyst was improving economic data with the flash April purchasing managers index showing further expansion to 56.8 and the German Ifo business climate index rising to 112.9 from 112.4, the highest level since July 2011. <

United States

Equity markets in the United States were in the main moving sideways amid disappointing macro-economic data for Q1 GDP growth and the purchasing managers index. In USD terms, the S&P gained 1.0% (-2.2% in GBP) and surprisingly, and if not somewhat odd, the VIX Index, a gauge of fear in the markets, ended the month at a very low level at 10.6%.

Emerging Markets

The MSCI Emerging Markets Index returned 2.2% in USD (-1.1% in GBP) helped by the weaker Dollar and an increased risk appetite. Emerging Markets’ dependence on commodities has declined and is driven in part by domestic growth. European Emerging Markets (ex Russia) performed the best, helped by the decreased political risk of the first round of elections in France.

Fixed Income

The one asset class that did well in April was inflation-linked bonds. UK inflation-linked bonds returned 2.5%, driven higher by the increase in inflation. This was true for most regions, with TIPS and European inflation-linked bonds up as well in their local currencies. Corporate bonds, both in investment-grade and high yield, returned positive results as well for the US, Europe and the UK.

Commodities

As an asset class, most of the commodities retreated in April, with WTI Crude Oil down -3% for the month in USD. Gold on the other hand did not lose its shine and gained 2% in USD, not perturbed by potential rising rates in the US.

Market Returns Overview

Source: Markit, Twenty20 Investments, as of 30 Apr 2017, all returns in GBP.

5. April 2017 21:34
by Irene
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March 2017 - Market Commentary

5. April 2017 21:34 by Irene | 0 Comments

We have seen a good start to the year in equity markets and also the first rate rise of the year in the United States. Over the last quarter, a lot of the increase in markets has been geo-political in nature. While the confidence in the economic outlook has generally improved, the risks are currently being driven by politics far more than is usually the case. The most likely source of future volatility during the next quarter are the European elections and the on-going politics that will arise in the United States as competing factions debate how much fiscal stimulus will eventually be pushed through.

United Kingdom

And there is of course Brexit. The UK has triggered Article 50 and is now on a two-year deadline to agree payments to Europe, trade deals with Europe and the rest of the world, and whether it will remain a ‘United’ Kingdom. On top of that, inflation has surged, with last summer’s currency drop in Sterling finally filtering through to consumer prices with an accompanying drop in consumer confidence and slump in spending. The FTSE 100 though has still returned 1.1% for the month of March and is up 3.6% for the year.

Europe

In Europe, business surveys have risen to their highest levels in over five years and consumer confidence has recovered. The solid economic data has helped equity markets, accompanying reduced political concerns following the win of more centrist parties in recent elections in Austria and the Netherlands. The MSCI Europe Index has returned 3.3% in EUR for the month of March (2.6% in GBP) and 6.0% for the first quarter (5.3% in GBP). <

United States

The United States have seen their first rate rise for the year, but as it had been mostly priced in, the effects were subdued. Expectations are for two more rate rises to come this year. The S&P 500 took a breather over the month, returning just 0.1% in USD (-1.2% in GBP). Partly this has come on the back of fears that fiscal stimulus might not be as easy to be pushed through as was hoped first, despite the fact that the Republicans are controlling both houses in the US.

Emerging Markets

Besides Europe, Emerging Markets have been the other winners for the month, with the MSCI Emerging Markets Index returning 2.5% in USD (1.1% in GBP) and 11.4% for the first quarter (9.6% in GBP). This was supported by a weaker US Dollar, an increase in global growth and stable economic data from China, and the signal of a gradual profile of tightening in the US. Japan has seen a fairly positive outlook as well, with falling unemployment and a positive sentiment from businesses, but the latest strength in the Yen over the last three to four months, however, has not helped Japanese equities.

Fixed Income

Government bonds were more or less flat in the US, Eurozone and the UK, and corporate bonds followed suit. Emerging Markets sovereign bonds showed a similar behaviour for March, returning just 0.3% in USD, although this number stands at 4.0% for the first quarter (2.0% in GBP).

Commodities

Oil has been at the bottom of the leader board in March, falling -7% in USD. Gold on the other hand was down only -0.9% in USD, although it returned 8.6% over the first quarter (6.1% in GBP).

Market Returns Overview


Source: Markit, Twenty20 Investments, as of 31 Mar 2017, all returns in GBP.

6. February 2017 14:58
by Irene
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January 2017 - Market Commentary

6. February 2017 14:58 by Irene | 0 Comments

We welcomed 2017 and were greeted with political headlines by the dozen. Finally we have a new president in the United States and any hopes of a more moderate tone coming from the White House after President Trump’s inauguration were shattered very quickly. If Trump sticks to his economic growth election promises as much as some of his other more controversial promises then we should see growth in the US and the rest of the world. There is still some risk associated with that and while from a macro-economic point of view the global economy looks quite positive (global manufacturing PMI for example was at 52.7 in December, showing expansion), the risks on the horizon seem to be more of a political nature.

United Kingdom

Closer to home, Prime Minister Theresa May had to battle with her own political agenda – Brexit and whether she needs the vote from MPs or not, a NHS in crisis, and a visit to the US that seemed rosy for only a very short period of time. The answer to the Brexit vote is yes, which will mean some more discussions and amendments before Article 50 can be triggered with the EU. The markets still took it as a sign that Brexit will go ahead, with Sterling slightly up and the FTSE 100 slightly down since then. Over the full month, the FTSE 100 lost 60 bps and Sterling is up 1.9% against the Dollar. Still, the outlook for the UK economy, aside the Brexit risks, looks positive.

Europe

Election fever is slowly starting across Europe. France is already voting for its different party candidates and currently Mary Le Pen of the Front National is in front for the first round, but the odds are still low for a general win. The Netherlands and Germany will be voting as well this year and we might see Italy added to this mix after their constitutional court ruling with mixed results. This adds political risk, also for the United Kingdom, although Europe is looking good with stronger growth and higher inflation. <

United States

Donald Trump was inaugurated as the new President of the United States and already started with a flurry of controversial executive orders. All eyes will now be on his fiscal policies and whether he will keep his promises of extra jobs and be able to instil more growth into the economy. The question is also how much of that hope of increased fiscal stimulus is already priced into the markets.

Emerging Markets

Emerging Markets equities had been battered after President Trump’s election, but have regained some of these losses in January, in part due to the recovery in commodity prices. Brazil was the winner, returning 11.0% in USD (9.2% in GBP) and the MSCI Emerging Markets index returned 5.5% in USD. China released GDP growth numbers for the fourth quarter of 6.8% annualised, slightly faster than expected.

Fixed Income

The reflation theme, which had driven the appreciation of the Dollar and bond yields in the last two months of 2016, paused for breath in January. Treasuries were approximately flat and flows were more into higher yielding bonds like high yield and specifically also Emerging Markets bonds.

Commodities

Finally it was a fairly mixed month for commodity markets with metals outperforming and gold returning 5% in USD, but oil on the other hand down -2% (WTI Crude) on concerns of additional supply from the US.

Market Returns Overview


Source: Markit, Twenty20 Investments, as of 31 Jan 2017, all returns in GBP.

5. October 2016 15:57
by Irene
0 Comments

September 2016 - Market Commentary

5. October 2016 15:57 by Irene | 0 Comments

Markets were fairly calm in September as another month has gone by with the Federal Reserve not raising rates, providing some short term volatility which then melted away when the Fed reported that there would be no change in September. This is in contrast to the four rate rises expected for this year at the beginning of the year.

United Kingdom

The FTSE 100 still continued its post Brexit run. There is no additional QE in sight for the UK at the moment, but the fall of Sterling (12.4% since Brexit) has definitely helped UK stocks, especially in the more export focused FTSE 100 index. From a macro-economic point of view the UK did well too, with a slight fall in unemployment, an increase in consumer confidence and the PMI manufacturing index at 55.4, up from 53.4 in August, and definitely in expansion territory.

Europe

There was more volatility in Eurozone markets, with concerns focusing around the banking sector. German and Italian banks were the hardest hit. The Euro Stoxx 50 is down -0.6% in local currency (1.4% in GBP) while the Euro Stoxx Banks index is down -3.8% (-1.9% in GBP). The manufacturing PMI for the Eurozone is up, with six of the eight countries in expansion territory, amongst them Germany, where manufacturing and business confidence is up. <

United States

Everything was calm in US markets until we got closer to the Federal Reserve meeting and there was speculation of a rate rise for this year, potentially in September. After the Fed opted to maintain its current policy, calm was restored and equity markets regained their earlier losses, with the S&P 500 finishing flat for the month. Macro-economic signals are good, albeit modest, with consumer confidence, payrolls and house prices up.

Asia and Emerging Markets

The speculation about a September rate hike in the US caused a reversal in emerging markets equities, giving back some of the gains earlier in the year. An increase in US rates makes emerging markets assets less attractive to investors seeking yield. In addition, a rate hike tends to strengthen the US dollar, which can cause problems to emerging market countries and companies holding a substantial amount of their debt in US dollar and potentially slowing the economic growth. The Bank of Japan changed its tack in QE now targeting to push inflation to 2%. This can be seen as a new way of QE as the ‘old QE’ of reducing rates and purchasing assets is getting less effective.

Fixed Income

In bond space, government bonds were mainly negative, (UK gilts returned -2.4%), while inflation-linked bonds were around flat in local currencies. In the higher yield end, the best performers were emerging markets local currency bonds, with the iShares EM Local government bond ETF returning 1.4% in USD (2.7% in GBP).

Commodities

There is hope that the OPEC meeting will result in a production freeze, which helped oil with WTI Crude being up 6.1%. Gold was up 1% in USD which did help gold miners, with the S&P Commodity Producers Gold Index up 4.2%.

Market Returns Overview



Source: Markit, Twenty20 Investments, as of 30 Sep 2016, all returns in GBP.

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