Towards the end of the month, many large American companies – including Apple, Microsoft, Coca-Cola, and Mastercard – reported bumper quarterly profit numbers. Our US tracker fund has proportionate allocations to all those companies.
Emerging markets bore the brunt of the panic over the emergence of a novel coronavirus from a fish market in Wuhan, central China. The data suggests that the outbreak is more contagious than SARS was, but less deadly. China reacted with speed; closing roads, airports, and railways, quarantining tens of millions of people, and building a new hospital in a few days. The virus will likely put a dent in Chinese GDP numbers, but the long-term impact should be limited. We used the opportunity to increase our exposure to emerging markets at better prices than before.
The new president of the European Central Bank, Christine Lagarde, launched a year-long “strategy review” which calls into question what the central bank’s role is. Since 2003 the ECB’s mandate has been to achieve inflation just below 2%, but Lagarde wants to expand this into new areas like inequality, technology, and climate change. A stream of poor economic data painted a picture of a continent in poor shape. France’s economy shrank by 0.1% in the fourth quarter as strikes over President Macron’s pension reforms put a drag on activity. Italian GDP shrank by 0.3%, the country’s worst performance since 2013.