The fifth month of 2021 will not go down as an important month for global investors. Most equity and bond market investors made some positive – but relatively modest – gains during May. And whilst COVID-19 vaccination progress across many countries has been notable over recent weeks, the general economic outlook across the U.K., United States and Europe has recently improved. Certainly underlying confidence for the rest of this year and into 2022 has improved over recent weeks.
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.
Welcome to March, a time in the past when I have gone all Shakespearean in my written musings and quoted the famous words imagined uttered to Julius Caesar before his assassination. It looks as if the Ides of March (typically regarded as the fifteenth day of the month) will be just after a series of further Brexit related votes which could provide the greater clarity consumers, industrialists, politicians and investors seem to desire. As one economic survey, focused on the view of UK manufacturers, strikingly put it recently: ‘The march of the makers has turned into a painful crawl, where only certainty about the Brexit way forward can ease the sector’s pain’.
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.