As global trade tensions have tempered, markets have recovered over the start of this year up to levels where valuations are no longer cheap relative to historic averages. Strong Q1 corporate earnings have supported this rebound and China has started to produce more promising economic data, lifting global hopes of prolonged growth through this economic cycle.
Brexit has been extended until Halloween (Thursday, 31st October). This extension has had a minimal impact on the UK stock market as well as the value of Sterling as the extension seemed inevitable. The likelihood of a no-deal seems to have evaporated as no party seeks this resolution, but we are no closer to reaching an agreement with the EU and the current state of limbo is still damaging to the economy. This being said, we are still optimistic on the UK outlook as corporate earnings and fundamentals continue to show strong signs and consumer spending still appears to be ignoring the Brexit chaos. Our Castlefield CFP SDL UK Buffettology Fund achieved 11.2% growth in April, surpassing benchmarks and outperforming peers.
The US Federal Reserve (Fed), has reiterated policy of steady interest rates as we remain patient and await future economic data. The easing of trade tensions is clearly good news for US markets as both the S&P 500 and NASDAQ breached their all-time highs over the final two days in April. Regardless of the slow-down in the global economy, US tech stocks such as Amazon, Microsoft and Facebook all outperformed growth expectations. Donald Trump and the Fed both seem aligned in extending the economic cycle as President Trump gears up for his 2020 re-election bid. This is likely to relieve the rhetoric for trade tensions worldwide, improving the outlook for many economies.