As you will have no doubt heard in the news, 2018 was not a good year for the majority of investments – in the UK or globally.
President Trump started a trade war with China, after imposing tariffs on approx. $50bn worth of imports. The new import taxes were aimed at forcing Beijing to stop what the US claims had been systematic theft of US intellectual property and applied to a wide variety of products. China swiftly responded providing their intention to impose their own tariffs. Although these tariffs only represent a very small element of global trade, the fear of escalation continued to worry markets.
Emerging markets also came under pressure as the US dollar rose strongly following the steady rise in US interest rates. A rising dollar is generally negative for emerging markets as refinancing dollar debt becomes more expensive to service.
From a risk perspective, geo-political tensions and trade wars will continue to dominate headlines and markets will react accordingly in the short term. Economically, the challenge for central banks is how they unwind years of financial stimulus which has enhanced asset prices for almost a decade.
As the global economy improves, central banks need to reduce this stimulus in an orchestrated way which is fundamental to financial stability. Overall, global growth is improving but inflation has risen at a slower pace despite a tight labour market. We firmly remain within the ‘Goldilocks’ environment which continues to deliver reasonable growth and stable inflation. While we see further potential volatility triggers on the horizon in the short term, we also believe that the economic cycle has further to run.
The performance of our 3 most popular Wealth Management portfolios for the year, together with the FTSE 100 Index, is highlighted below:
Moderately Cautious -3.2%
Moderately Adventurous -4.9%
FTSE 100 Index -8.7%
We appreciate it can be nervous times for investors, but it’s important to remember these type of downturns are part of investment market cycles – we’ve just gone through a low-volatile period in recent years.
Our advice is to ride out the volatility storm and wait for more promising news.