The value of investments and any income from them can fall and you may get back less than you invested.

Market Comment - April 2018

Equity markets rebounded in April following a challenging first quarter. Whilst the concerns that triggered the sell off at the start of the year remain; such as slowing economic growth, increased inflationary risks and growing global trade tensions, the mood surrounding the equity market lightened significantly.

The UK equity market led the way over the month. Whilst it is difficult to assign a simple narrative to these short-term fluctuations, it seems the market reacted positively to the more dovish outlook for monetary policy. At the start of April, the market had assigned as a near certainty that the Bank of England would raise rates at their next meeting, however following some disappointing data and dovish comments from governor Mark Carney, this probability dissipated to only about a 20% chance. To enhance this, and perhaps of greater importance, was simply how downtrodden the UK market had become. Surveys had indicated that investor positioning was extremely negative towards UK equities, meaning it took very little iteratively better news to see a sharp reversal in the fortunes of the market.

Whilst the UK led, all major global equity markets produced positive returns over the month. The global economy remains in good shape, and whilst indications are that growth momentum is likely to have peaked towards the end of 2017, global PMI data almost universally implies a continued expansion in activity. This environment has supported corporate profitability as highlighted by the particularly strong US earnings season over the month. Whilst the 80/20 ratio of “beats” to “misses” is something we have become accustomed to, the difference this season was that expectations were not slashed in advance to manufacture the result. In fact, we saw modest upgrades in advance of the results, largely due to the positive impact of the tax reforms, which companies still managed to exceed at the normal 80/20 rate.

The expansion of the Japanese equity market came despite a return of political risk to the country. Japan had endured six different prime ministers in a five year period prior Shinzo Abe’s election victory in 2012, however this period of relative calm has been interrupted in recent months by a number of cronyism scandals that have dented Abe’s popularity. This has raised the real possibility that he could be defeated at the upcoming LDP leadership election in September. The markets accommodating reaction to this is perhaps a reflection that the policies underpinning Abenomics look protected, as his party, the LDP, still enjoy a large lead in the polls.

Finally, the progress of various geopolitical tensions was mixed over the month. There was a pause to the Sino/American trade spat that had soured investor sentiment at the start of the year, as the consultation period on the proposed tariffs proceeded. There was a historic meeting between the leaders of North and South Korea in the demilitarised zone, which greatly reduces stress in the region. However, in contrast relations between the US and Iran escalated as the US prepared to remove itself from their nuclear deal.

The return of volatility that has characterised the start of 2018 was to be expected, as investors weighed up the robust economic and corporate environment with the worsening liquidity conditions. We are therefore positioned cautiously, with a small preference for equities over bonds, monitoring the evolution of the cycle closely.

Michael Paul CFA
Fund Research Analyst

Past performance is not a guide to future performance.

No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us.

The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

The value of investments can fall and you may get back less than you invested.

If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset.

The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.

Share

You are entering the financial advisers' section UK legal information

Important Information

Please read this page before proceeding, as it explains certain legal and regulatory restrictions applicable to the information in this section of the website.

By clicking the 'Accept'/'Decline' buttons at the end of the page, you acknowledge that the important information below has been brought to your attention.

This section of the website is intended for residents of the United Kingdom only and any dispute or action arising out of the website shall be determined in accordance with English laws. Under no circumstances should any information or any part of it be copied, reproduced or redistributed.

The information provided in this section of the website is intended solely for investment advisers, accountants, solicitors and any other professional financial intermediaries who are authorised and regulated by the Financial Conduct Authority. This information must not be distributed to, or relied upon by, private clients and the general public.

This website should not be regarded as an offer or solicitation to conduct investment business, as defined by the Financial Services and Markets Act 2000, in any jurisdiction other than the United Kingdom. Investors who are resident in or citizens of countries other than the United Kingdom may be subject to local restrictions. In particular, no offer or invitation is made to any US persons (being residents of the United States of America or partnerships or corporations organised under the laws of the United States of America or any state, territory or possession thereof), who are excluded from the products or services offered in this site.

Brewin Dolphin Limited is registered in England and Wales under company number 2135876 with its registered office at 12 Smithfield Street, London EC1A 9BD. Brewin Dolphin Limited is a member of the London Stock Exchange and authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444).

The information contained in this section of the website has been obtained from sources which we believe to be reliable and accurate at the date of publication, but without further investigation this cannot be warranted. We are not responsible for the content of external websites that are linked from our webpages. Any opinions and comment expressed in this website are not necessarily the views held throughout Brewin Dolphin Limited. All opinions and comments are subject to change without notice.

The value of investments and any income generated may go down as well as up and is not guaranteed. Investors may get back less than they have invested. Past performance is not a guide to future performance. Quoted yields are not guaranteed. Different funds have different levels of risk. Changes in currency exchange rates may have an adverse effect on the value, price or income of investments. Interest rate fluctuations are likely to affect the capital value of investments within bond funds.

We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed here.

This website uses cookies to store information on your computer. These cookies contain no personal or confidential information and we will not attempt to identify you from this information. They are important because they allow us to make your website experience better and they also help us to monitor how people are using our website and make improvements appropriately. To find out more, please visit our Privacy and Cookie Policy.

Please click below to confirm that you are a UK investment adviser or a professional financial intermediary, and that you have read and agreed to the important information above.

By clicking accept below you confirm that you have read the important information and wish to continue to this site.

Accept Decline