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

Market Commentary February 2020

Share

Guy Foster, our head of research gives you a rundown of the financial markets for the first few weeks of 2020.

  • The best laid expectations of forecasters were rapidly tested during the first days of a dawning new decade with a series of unforeseen and largely unforeseeable events.
  • Within the very first days of the new decade the assassination of the Iranian general, Qassem Soleimani, raised fears that prolonged conflict in the middle east might result.
  • The risk of conflict around the Persian gulf is a persistent threat to the global economy as it has the potential to disrupt oil supply, pushing energy prices up and raising costs for companies globally.
  • Iran’s leaders, probably judging that all-out, military conflict would be terminal for their regime, seemed to respond in a way which has saved face whilst allowing the situation to de-escalate, at least initially.
  • Shortly afterwards a greater and less predictable threat emerged in the form of the novel coronavirus emanating from the Chinese city of Wuhan.
  • It has been noted that the virus seems more contagious than previous, similar infectious illnesses that have threatened the global economy over the last two decades (SARS, swine flu, MERS, Zika, Ebola), but initially seems to have a lower mortality rate.
  • The illness also strikes China at a time when the country’s rapid growth has made it the largest single contributor to the global economy, raising fears of severe economic disruption.
  • The market’s reaction of benign almost indifference has differed markedly from that of the, at times sensationalist media narrative.
  • Clearly the extraordinary attempts to stop the spread of the disease within China will have a dramatic impact on the economy in the first quarter of 2020. Around two thirds of the country took a protracted fortnight extension to the lunar new year holiday which, back-of-the-envelope maths would suggest, implies a decline of 2.5% to 2020 GDP. However, it is widely anticipated that much of this will be economic activity deferred rather than lost, with the lasting impact restricted to sectors like travel and tourism.
  • Meanwhile attention turns to the spread of the disease which infected tens of thousands of people across 28 countries.
  • Plenty of attention has been given to the search for a vaccine. However history, has shown that the eventual decline in the infection rate of diseases of this type actually comes from controlling cases and symptoms. coinciding with an improvement in environmental conditions.
  • So with 75% of cases restricted to Hubei (a province which represents about 0.5% of the world’s population) and 99% of them within mainland China the disease remains remarkably contained. The emergence of Hubei from its winter should see the infection rate slow further.
  • Markets suffered some weakness during the weeks in which the infection rate rose most sharply. If there was any contrast to be drawn between this and previous episodes of infectious diseases, then it was that the market took an even more magnanimous view of the lasting impact of the outbreak on economic growth and corporate profitability than it has done in the past.

“So, who had ‘mutated bat-snake flu’ as their top market risk for 2020?”

Tracy Alloway (Bloomberg reporter) @tracyalloway

Our Markets in a Minute video with Guy Foster gives you further insight to some of these key issues and what investment decisions we have made because of them.

Capital and income from it is at risk.

Neither simulated nor actual past performance are reliable indicators of future performance.

Performance is quoted before charges which will reduce illustrated performance.

Investment values may increase or decrease as a result of currency fluctuations.

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.

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