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6. January 2017 17:36
by Irene
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December 2016 - Market Commentary

6. January 2017 17:36 by Irene | 0 Comments

In a year driven by market events, the month of December didn’t disappoint as the investment community had to contend with the second Fed hike since the Global Financial Crisis of 2008, potentially destabilising elections/referendums in Austria and Italy and the on-going soap opera as President Elect Donald Trump used his Twitter account to front run future government policy as he prepares to move into The White House.

United Kingdom

After what had been a dreadful two months for the bond markets across the globe, December finally showed some respite and none more so in the UK where both the Gilts and Index-Linked Gilts performed well returning 1.8% and 3.7% respectively. With the rebound in the equity markets, with a particularly good showing in the Financial and Energy sectors, the FTSE 100 delivered a total return in performance in excess of 5% for the month. Who would have imagined that Trump’s Twitter comments about what he thought about traditional forms of energy could impact the UK stock market so directly? Welcome to Geo-Politics 2017 style!

Europe

A carefully managed announcement about trimming back QE from Mario Draghi, the President of the ECB, avoided a repeat of the now infamous Taper Tantrum and as a result the European Bond markets saw very little disruption. This coupled with the fact that after the impact of the Brexit and US Presidential election votes (where basically many of the worst outcomes had been priced into the equities market) resulted in December being a good month for many European investors. With a strengthening of the Euro relative to Sterling, in GBP MSCI’s Europe Index delivered a total return of 6.7%. <

United States

As we look back over the month to what happened in the US markets, one is reminded of what in the past was described as ‘Irrational Exuberance’, as the equity markets only looked in one direction. Of particular note was the continued ascendency of the Russell 2000 Index, the S&P 500 Index and the Dow Jones Index as it challenged that all so important physiological barrier of crossing the 20,000 level.

Fixed Income

Currency wise GBP lost some ground to all the leading currencies, USD, EUR & JPY, depreciating 2%, 1% and 0.2% respectively. While good for those investors with exposure to assets denominated in these currencies, it has however ratcheted up the likelihood of the UK suffering an increased bout of inflation. We say, watch this space, as this may be the key driver of UK economic behaviour in the year ahead.

Market Returns Overview



Source: Markit, Twenty20 Investments, as of 31 Dec 2016, all returns in GBP.

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