Investment perspectives - summer 2019
Capital markets update
22 Aug 2019
In this capital markets update, Chris Arcari shares the latest trends in the market.
Forecasts don't point to an impending recession, but it is fair to say we are “late-cycle” – global growth is expected to slow and the risks to the downside have increased. Actual realised “hard” economic data and surveys reflecting sentiments and beliefs, so called “soft” data, have pointed to a slowing of the global economy in the second quarter. While the US economy continues to outperform global peers, growth eased to 2.3% year-on-year in the second quarter. Monthly GDP figures revealed the UK economy showed signs of weakening in the three months to April, with the economy shrinking 0.4% in April, mainly due to a dramatic fall in car production, with uncertainty triggered by the initial Brexit deadline leading to planned shutdowns. To some extent, a slowdown in Q2 was expected: in the US, as the effect of last year’s tax cuts has fallen off and, in the UK, the boost from early completion of orders ahead of the UK’s original EU departure date has faded.
Chris shares the latest trends in the market, including:
- A sharp fall in government bond yields has been consistent with the weakening in economic data and concerns surrounding the global outlook.
- Global credit markets have largely ignored the less positive economic data and outlook: credit spreads snapped back in June after a brief sell-off in May, to end the quarter generally tighter.
- Equities performed strongly in the second quarter, looking through any short-term disruption and helped by Q1 earnings coming in ahead of expectations.
- The impending Brexit outcome is starting to make for a more difficult technical environment for UK property – investment volumes in the first quarter were the lowest they had been since the third quarter of 2016.
- Annual rental growth is as low as it has been for 5 years, although there are signs that it is stabilising.
To find out more, read the full capital markets update here.
This article is from our Summer edition of Investment Perspectives - you can access the full publication here.