Welcome to our first investment insight of 2020, in this publication, we aim to give you an update on the investment markets, including past performance and an insight into market sentiment and what potentially lies ahead. As this is the first of our investment insights this year, we will also be looking back at the past year and some of the issues that have affected investment markets over the last 12 months and the potential effects moving forward.
The last twelve months have seen a return of increased volatility in the market, that being said, there have been good gains made across most of the asset classes.
The above table covers the calendar performance of equities, bonds and property, as represented by the above sectors. Most people are looking to grow their wealth in real terms and look to achieve growth above inflation. The most up-to-date figures on inflation show that the Retail Price Index (RPI) and Consumer Price Index (CPI) figures for 12 months to November 2019 are 2.2% and 1.5% respectively. Cash deposits are still only providing around 1% on a good 30-day notice account with the current Bank of England Base Rate remaining at 0.75%.
There have been two main factors that have caused volatility in the markets in 2019 and they have been the US, China trade conflict and of course, the ongoing Brexit situation.
With Boris Johnson getting the majority he so desperately wanted at the recent election the withdrawal agreement should be passed and completed by the end of January. Unfortunately, that is not the end of Brexit as trade talks between the UK, and Europe will now begin with an aim to complete them by the 31st of December 2020. All the major investment houses that we are in conversations with have assured us that they have catered for the “Brexit” effect in their investment strategies. Still, undoubtedly it will continue to affect the domestic markets throughout the year.
Regarding the US, China trade conflict, we have seen some recent signs of reconciliation between China and the US with Donal Trump tweeting “Getting VERY close to a BIG DEAL with China. They want it, and so do we” and also the third rate cut this year by the US Federal Reserve in October should continue to encourage further advances in equity markets. However, there is a worry that a re-elected President Trump, no longer facing a future election, could be more adversarial with China.
Looking to the new decade ahead, the 20’s will present new challenges for investors, with heightening tensions in the middle east along with the outbreak of Coronavirus, many factors are likely to affect the investment outlook. We are in a changing world with an ageing population in developed markets, a shift towards deglobalisation, the technical revolution (continuing at a pace) and with a slow but steady shift towards more sustainable products and services there will be more exciting and durable growth opportunities to come. One thing is for certain; volatility will remain a factor throughout the year ahead, making a well-diversified portfolio of investments and sound financial advice more important than ever.
The views reflected in this letter are the views of Imperial Chartered and should in no way be taken as investment advice. Please remember that the value of investments can fall as well as rise, past performance is not a guide to future performance and the value of investments are not guaranteed. If you require investment advice or would like to discuss the contents of this letter in greater detail, please do not hesitate to contact your Imperial Chartered Independent Financial Adviser.