Commodity prices across the spectrum are down at least 20% from their 52-week highs, but could rebound sharply in 2019, if concern over slowing economic growth and the trade war between the US and China lifts.
Just one piece of encouraging economic news – the December US jobs report – was all it took to change the market’s mood and send stocks higher in the first few days of the New Year; but this recovery could easily prove a brief respite.
In recent years, the performance of growth stocks such as technology, consumer discretionary, materials and industrials has eclipsed the rest of the equity market. In fact, growth sectors have outperformed their defensive counterparts, including consumer staples, telecoms, healthcare and utilities, by 40% since the start of the bull run in 2009.
It would be easy to imagine that the US/China trade war and the US Federal Reserve’s resolve to tighten monetary policy, which have been the two big fears hanging over the US stock market throughout 2018, are reaching some sort of stasis. The market certainly rejoiced when Fed chairman Jay Powell made the dovish comment that interest rates are “just below” the range of rates considered neutral. The Dow Jones Industrial Average index shot up by 600 points in one session, its best single-day gain since March.
This article was written in early November for the December 2018 print edition of Money Observer. Market data and share prices are likely to have since changed.
The Investment Association’s global emerging market bond fund sector – which was split off as a separate category in 2015 for funds investing at least 80 per cent in emerging market bonds – has become a very mixed bag of funds specialising variously in hard currency, local currency and corporate bonds.
The big news this month has been the climb in US 10-year Treasury bond yields to 3.2%, their highest level since July 2011. Bond yields had been rising gently (and their prices falling), reflecting confidence that the US economy was robust enough to weather trade wars and other setbacks. However, the rise has spooked markets, forcing a reassessment of risk-free assets compared with equities.
For most of us, the idea of a secure, regular income in retirement is a highly attractive one. However, buying an annuity, which is the only way to achieve a guaranteed income if you don’t have a final salary scheme, has had a bad press.
The pension freedoms introduced in 2015 have been well received, particularly by people in their 50s looking to take tax-free cash. But it is early days, and both consumer bodies and the financial services industry are concerned that many self-invested personal pensions (Sipps) are being managed by people without much investment expertise, who are making poor decisions that could have dire consequences for them.
US equities defied logic in August by climbing 3 per cent, despite the rise in the federal funds rate. The S&P 500 index has now risen by 230 per cent since 2009 – the longest bull run in history – and has a price/earnings ratio more than 50 per cent higher than its historic average.