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What’s affecting your investments: A look back at 2018

Investment manager Alex Neilson reviews the news of the year – and the impact on your portfolio

Topic: Investing

Throughout the year we’ve been reporting on the headlines driving market movements, from Trump’s international relations, Brexit news, to interest rate rises at home and abroad. So as the year comes to a close, let’s take a look back at the events that have had the greatest impact, and those that will continue to do so into 2019.

We started 2018 with a healthy amount of optimism, after a 2017 that saw some of the highest levels of global economic growth since 2010. But a few weeks into January, the stock market took its first knock. It started with reports of accelerating wage growth, which investors took to mean that employer spending was rising, and companies would have to increase the costs of goods and services. Predicting that interest rate rises would follow, investors rushed to sell off shares.

February was a calmer month with less market fluctuation, and Click & Invest performance was ahead of its benchmark. The biggest news in the UK was the spring statement, which reflected a gradual improvement in public finances.

By March we were seeing the impact of trading troubles between the US and China – a theme that run throughout 2018. Concurrently, the value of the pound was weakening against the US dollar, prompting us to initiate a trade to buy US government bonds. As of 11 December, these have delivered a return of 15.77%*.

UK interest rates were expected to increase in April, but were held at 0.5%* as the Bank of England lowered growth expectations. This was good news in the short term for investors: interest rate rises mean increased mortgage payments, and so less money going into the economy. With this threat postponed to later in the year, the markets reacted positively.

Trump’s withdrawal from the Iran nuclear deal in May sent oil prices soaring to a three-and-a-half year high.

In June the G7 leaders met in Quebec for discussions themed around trade. President Trump’s decision to introduce tariffs on steel and aluminium caused tension with Canada and the EU, who proposed tariffs on US imports in return. This brought a bit of volatility to the markets, so we were tracking the conversation closely.

Trade negotiations between the US and China escalated in July, with Trump threatening to increase tariffs from 10% to 25%*. In Brexit news, both David Davis and Boris Johnson resigned from Theresa May’s government.

The UK interest rate rise we expected in April came instead in August, increasing to 0.75%*, the highest since the 2008 financial crash. The Bank of England stressed that it felt the UK economy was strong enough to copy with the rise.

Interest rate rises are typically seen as good for savers, but in September UK yearly inflation hit 2.7%. This means that money sitting in savings accounts is slowly eroding in value, as interest rates are well below this level. Meanwhile, our investment managers made the decision to add Schroder Global Cities to portfolios, which are up 8.5%* since the addition.

October was the most volatile month we’ve seen in some time, with US markets wiping out their gains throughout 2018. Asian and European markets were also badly hit, though many markets rallied towards the end of the month.

Brexit dominated the headlines in November, but had surprisingly little impact on the markets. Elsewhere, tech stocks took a big hit, and the markets were shaken by a fall in oil prices.

December began with the G20 summit, and positive trade discussions between the US and China. As the world’s two largest economies, these countries have a huge influence over global markets and this is one of the issues we’ve been most closely monitoring throughout the year, to mitigate the risk to your portfolio.

All in all, as another year passes, and we continue to learn, one thing remains the same – it always pays to be invested in our changing world.

*Source: Investec Wealth & Investment

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