Ne’er cast a clout till May be out

  • Weekly market update
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  • Global equity market performance was primarily positive across the board. In GBP terms, Europe rose the most, up +1.27%, followed by the UK (+0.69%), Emerging Markets (+0.60%), the US (+0.44%). Japan being the only outlier, down -0.81%.
  • Bonds were mixed over the week. UK Gilts and corporate bonds rose +0.36% and +0.65% respectively. In local terms, European government bonds rose +0.29% and US government bonds fell -0.03%.
  • GBP depreciated vs EUR, JPY and USD by -0.52%, -0.61% and -1.12% respectively.
  • In USD terms, the oil price fell -2.68% and gold fell by -0.64%.


  • May survived her party’s vote of no confidence, defeating the rebel Conservatives 200 to 117, providing some respite for Sterling as she is likely to helm Brexit until March. Despite this, a great deal of uncertainty remains, with a parliamentary vote on May’s deal announced for the week of the 14th January, leaving limited time ahead of the 21st January deadline to reach agreement with the EU.
  • The French reform momentum hit a roadblock following protests about the falling levels of living standards for low income households. Mr Macron has been forced into offering €10bn of extra public spending to France’s poorest groups. An increase in fiscal spending, coupled with lower oil prices, will be positive for household consumption and may boost GDP growth. However, his room to manoeuvre is limited, having already budgeted for a 2.8% deficit-to-GDP ratio in 2019, and any new fiscal policy measures will have to be offset by cuts elsewhere in order to stay under the 3% threshold.
  • The Fed is widely expected to raise rates on Wednesday, however the key question is what stance the US policymakers will take in 2019 with 3 more rate hikes forecasted for 2019 in the Fed’s own model. Arguably, the likelihood of an aggressive rate hiking cycle has declined since Trump lost control of the House, diminishing his ability to pass further tax cuts. This means that, without a second dose of stimulus, US growth will likely slow to normal levels, reducing the need for hikes and offering less upward pressure on the USD.

Our view

  • Global growth remains resilient although there is evidence of the recovery being less synchronised. We expect earnings growth to remain positive and inflation to cause gradual interest rate rises.
  • Despite elevated geopolitical risk, we believe this is an environment favouring equities over bonds.
  • Within our regional equity allocation, we are cautious on UK equities and favour those regions most attractively positioned to benefit from the improvement in the global growth dynamic.


Important information
The information contained in this document is believed to be correct but cannot be guaranteed. Past performance is not a reliable indicator of future results. The value of investments and the income from them may fall as well as rise and is not guaranteed. An investor may not get back the original amount invested. Opinions constitute our judgment as at the date shown and are subject to change without notice. This document is not intended as an offer or solicitation to buy or sell securities, nor does it constitute a personal recommendation. Where links to third party websites are provided, Close Brothers Asset Management accepts no responsibility for the content of such websites nor the services, products or items offered through such websites.


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