|The FTSE All-share was down 12.95% only UK gilts were able to give us a small positive return during the year. Research going back to 1901 from Deutsche Bank indicates that this is unprecedented. During 2017 there was only a little volatility, but 2018 made up for it. My crystal ball indicates that during 2019 we will need to be nimble to seek out returns. Good job we do not invest in bitcoin, it fell 70% during the year.|
Unfortunately politics has not helped. Trump’s war of words with China’s President Xi Jinping has affected trade in the Far East as well as Japan and Germany. Italy has not helped as they are Europe’s largest issuer of debt and they are struggling to agree a budget with Brussels, just as the ECB slows down its version of QE. We won’t even talk about the UK.
As you are aware the US has been slowly increasing interest rates and removing liquidity from the markets as Trump’s tax cuts fuelled the US economy. This has affected any countries dependent on the USD. However more recently the US FED looks like it has softened its tone and may slow down the rate hike cycle, which will weaken the USD reducing the headwinds and helping emerging markets. You may have noticed the price of petrol coming down and it will also help gold.
In the UK we have started to raise rates to 0.75% from a 300 year low of 0.25%. But with inflation hovering around 2.3% and an unemployment rate at only 4% the BoE MPC will be looking to increase rates further when the conditions are better.