Global equity markets have generally become range bound in recent weeks awaiting further developments in the ongoing trade negotiations between the USA and China. Hints of a positive breakthrough are greeted with small market gains while news suggesting that breakdown is more likely have the reverse impact. All of this is against a background of slowing global growth which has led to a resumption of the trend towards lower interest rates, so far principally in the US and in the Eurozone while bank reserve requirements in China have again been cut. All in all, therefore, monetary conditions remain loose and at least one of the Bank of England’s board members has suggested that the UK may need to follow suit. In the meantime, company profits have been generally positive, notwithstanding some disappointments and we continue to believe in the long term merits of equity investing.
Other investment areas, notably fixed interest, alternatives and global commercial property have continued to deliver steady results and again, in an era of easy monetary policy, appear set to continue in similar veins, all continuing to be supported by low interest rate trends.
In the UK, the short, medium and long term impact of Brexit on the economy remain entirely unquantifiable. Investors in UK equities have so far been largely shielded from the uncertainty simply because many UK companies derive much of their turnover and profit from overseas activities which have been magnified in Sterling terms as a result of the devaluation that has taken place over the last three years. However, this has not helped more domestically focussed companies and we continue to underweight the UK equity sector.