Weekly Market Update: Equities continue to climb, Pound gains vs Dollar and Yen

Mon 15 Apr 2019

Read our full Market Update Week 15

Market Update

Global equity markets were mixed last week following a period of strong returns. In Sterling terms global equities were down -0.1%, although in local terms were up +0.5%. In Sterling terms European equities were the only positive region, up +0.2%. US and UK equities were both flat, Emerging Market equities down -0.2%, while Japanese equities were particularly weak, down -2.1%. Healthcare was the weakest sector due to threats of caps on prescription prices, while financials was the strongest performing sector as global yields rallied and yield curves steepened. UK 10Y Gilt yields were up +9.6bps to 1.212%, while US 10Y Treasury yields gained +7.0bps to 2.565%.The Pound was mixed against other currencies, gaining +0.3% and +0.6% vs the US Dollar and the Japanese Yen respectively, however down -0.5% vs the Euro. In US Dollar terms Gold fell -0.1% while Oil gained +1.3%.

CIO Analysis

As equity markets are again near all time highs the question is: where to now? On the upside, there’s a dearth of fiscal catalysts, whereas monetary policy has become as accommodative as possible. It is possible that a good US earnings season or a trade deal between the US and China may provide the necessary momentum to break new highs, but neither factor can fuel a sustained rally. And yet, with dovish central banks, downside risks are contained as well. In this environment of uncertainty, where Brexit also adds a layer of risk, we believe that our portfolios are best served by a “neutral” position until either upside or downside catalysts make themselves known. Meanwhile, we continue to monitor the US President’s sustained attacks on the Fed’s independence, in what could grow to become a key risk going forward

David Baker, CIO