With ‘fast fashion’ being so prevalent in today’s world, perhaps we should not be surprised that Oscar Wilde’s dictum looks a little slow as the world only racked up four successively positive months before a reversal. May 2019 will not go down in the financial market almanacs as anything other than a shabby month, with the regional pan-European share index falling around 5% and more than reversing any gains seen earlier in the quarter. Broadly speaking, this performance pattern in May – supplemented by the compression of sovereign bond yields – was repeated all over the world.
Thinking about everyone’s favourite subject, it was striking to read that a well-known UK consumer confidence index indicator released in the last few days was flat for the third month in a row, with an accompanying write-up that included the comment that ‘despite political carry-on in the Westminster bubble with the clock ticking on Britain’s eventual departure from the EU, consumers are holding firm and remain unshaken by the daily headlines of turmoil and intrigue’. Too right that there is a real and breathing UK economy still out there… and that the ongoing Brexit debate does not need to exclusively define the UK economy and its prospects.
If you had to sum up why world, ex-US, financial markets typically underperformed during 2018 then economic growth, currency movements, and trade talk uncertainties would be the three most influential headwinds. Simply put, U.S. economic growth surprised on the upside whilst other major economies did not, the dollar appreciated against most other currencies, and concerns about essential future trading relations impacted the more export-focused European and emerging markets last year. In order for international markets to gain momentum over the U.S. in 2019, these concerns need to be quelled.
I realise the title above sounds a little like a famous advert from the 1990s (other telecoms operators are available) but, at least during the last month, the world’s political and economic leaders have continued to talk. And talking is just what they need to do. Of course making a few decisions is even better… so thank goodness the season of perpetual hope is almost upon us. More on the global financial markets Christmas presents wish list later.
Despite the usual weather downers such as the tennis at Wimbledon or the start of the school holidays, July was a warm month pretty much anywhere you looked in the northern hemisphere. Global stock markets were hot too, led by the out-of-favour emerging markets and Continental Europe. Funny how all throughout June and July the aggregate investment flow data was profoundly negative for both regions…