Mazars Wealth Management Investment Newsletter – Autumn 2019

Fri 11 Oct 2019

Read our full MWM Investment newsletter Autumn 2019

Equity markets across the world ended the quarter broadly where they began having recovered from a slight loss of confidence during August. This stability came despite no improvement in economic data, and a further fall in government bond yields signalling a cautious economic outlook. In a similar vein Gold continued to rally as other safe haven assets became prohibitively expensive. Leading economic indicators, particularly in the manufacturing sector, gave no reason for optimism with the evidence suggesting that companies were completing backlogs with lower expectations of new business. This is particularly the case for export led economies, notably Germany, with trade figures still depressed as the dispute between the US and China shows no signs of being resolved, in addition to the Chinese economy being in a structural slowdown.

Supportive of equity markets was the continued loose monetary policy with both the European Central Bank and the US Federal Reserve cutting interest rates as expected. There is though now a general acceptance that such moves whilst benefitting financial markets are ineffective at driving a revival in the real economy. Years of cheap credit have not ignited capital investment, so why should a further small cut do the trick now? Attention therefore has turned to fiscal policy, and whether a more direct injection of stimulus in economies might be more catalytic for growth. New Chancellor Sajid Javid announced a spending package which is expected to breach fiscal rules, although this could be seen as more of an electioneering move than an economic policy. More significantly the German finance minister hinted at Berlin being willing to loosen its purse strings in the face of an expected technical recession in Germany.

For Sterling based investors the possible path of the Pound continues to be the largest short term determinant of returns as markets struggle to divine the likely path of Brexit. Constitutional crises might make for good news headlines, but they do little to shed light on whether the UK will leave the EU with or without a deal.

Our Investment Committee agreed to maintain our cautious stance reflected by our neutral position in equities and overweight position in gold and cash. Given the many possible outcomes in the Brexit debacle and the corresponding volatility in Sterling we decided to maintain our partial currency hedging position in our overseas equity holdings.

I hope you find this newsletter interesting and relevant to you, and I would very much welcome any feedback you may have. Please do feel free to get in touch with your thoughts either by phone on 020 7063 4259, or by email on david.baker@mazars.co.uk.