Q3 2019 Market Update
The drivers behind market performance in 2019
11 Sep 2019
Here is a brief overview of our Q3 2019 market performance update.
Risk assets have staged a strong recovery year to date, following the sell-off in Q4 2018. Much of this reflects a significant shift in monetary policy expectations, with many central banks either signalling a more accommodative policy stance or cutting interest rates. However, despite the strong year to date returns, there has been some volatility along the way. Concerns over slowing global economic growth have persisted throughout the year, not helped by the ongoing global trade disputes. The latest, albeit modest, sell-off in global equities and substantial fall in global yields came on the back of Trump’s proposal to impose a 10% tariff on the remaining $300bn of Chinese imports not already subject to the existing 25% tariff (Trump has since postponed the imposition on a proportion of this round of tariffs).
The table in the full article shows that UK equities for the year to date have delivered 9.7%, reversing the losses of 2018, even after the recent pullback. Whilst UK equities have underperformed global equities year to date (measured in local currency terms), the UK market’s international exposure means that in aggregate, the impact of the ongoing Brexit uncertainty has had a relatively modest impact. Sterling has thus far taken most of the strain, falling against other major currencies.
That said, funding positions will have been adversely affected by the recent turbulence for all but the best hedged schemes with a negligible allocation to equities. We would encourage trustees to balance the need to be alert to the drivers of any change in funding level with the need to take action to alert the investment strategy.
For more detail, download the full article here.