This year has started much more positively than the closing weeks of 2018. Global equity markets have recovered swiftly as a result of two significant changes. Firstly, the improved rhetoric towards China from the US has helped support stocks worldwide. Additionally, Emerging Market equities have rebounded following the US Federal Reserve’s announcement that they will be much more dovish with their interest rate increases.
UK fundamentals continue to look strong as unemployment is at its lowest level since the 1970s. However, the FTSE100 and FTSE All Share lacked growth when compared with other major indices in January as they only increased 3.6% and 4.1% respectively. Many of our CPN portfolios are invested in the Unicorn Outstanding British Companies Fund which gained 5.9% from investment in a range of superior FTSE All Share companies.
The outlook for the UK entirely depends on Brexit, Teresa May has returned to Europe in an attempt to seek and present a revised deal to the UK mid-February. It is likely that some of the uncertainty should clear up this month, which will show positive gains on UK markets. Since the uncertainty has caused the UK Market to be very undervalued, there is a big potential upside if a deal is reached. We remain overweight in the UK as a result.
On 25th January, after 35 days of shutdown, Donald Trump announced a short-term deal to reopen the federal government. The deal will keep the government open until February 15 while negotiations continue over funding for the border wall. More than 800,000 federal workers have been affected in the longest shutdown in US history. Despite the shutdown, the S&P500 increased 8% in January; one of the strongest indices of the month, backed by strong corporate quarterly earnings reports and a change in guidance from the Fed.