Weekly Market Report 10 January 2020
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Welcome to our weekly newsletter, where the Manager summarises the key market developments over the last seven days.

The Noise

International tensions flared again this week after top Iranian General Qasem Soleimani was killed by US forces in a drone attack at Baghdad airport. Iran vowed “severe revenge” for his death and declared two days later that it had abandoned the last limit on its enrichment of uranium imposed by the nuclear deal.

Correspondingly, gold hit its highest level in six years, treasury yields rose and Brent crude oil rose above $70 a barrel. Elsewhere, the US trade gap narrowed in November to it slimmest in three years as exports advanced amid a thaw in the trade war with China, while imports fell to the lowest level since 2017. Stocks made back earlier losses in the week as the risk of military escalation subsided.

In the UK, Bank of England Governor Mark Carney said on Thursday that the Central Bank could cut interest rates if it looks like weakness in the economy will persist. Money markets now price in a rough 20% chance of a rate cut at the BoE’s 30th January meeting, Carney’s last before he hands over the reins to FCA chief executive Andrew Bailey, who takes over on 16th March.

The Numbers

GBP Performance to 09/01/20
1 Week
YTD
Absolute Level
Equity GBP Total Return (MSCI)

UK (MSCI UK)

-0.60%

0.80%

6812

Europe (MSCI Europe)

0.30%

1.40%

7168

US (MSCI USA)

1.20%

3.10%

8844

Japan (MSCI Japan)

-0.10%

1.30%

6797

Emerging Markets (MSCI Emerging)

0.70%

2.90%

535

Fixed Income GBP Total Return

UK Government (Barclays Sterling Gilts Index)

-0.40%

0.20%

293

Investment Grade Hedged (Barclays Global Aggregate Corporate Bond Index)

0.00%

0.20%

303

High Yield Bonds Hedged (Barclays Global High Yield Index)

0.20%

0.40%

532

GBP Performance to 09/01/20
1 Week
YTD
Absolute Level
Currency Moves

GBP vs USD

-0.60%

-1.40%

1.31

GBP vs EUR

0.00%

-0.50%

1.18

GBP vs JPY

0.30%

-0.70%

143

Commodities GBP Return

Gold (in £)

2.10%

3.80%

1186

Oil (in $)

-2.10%

-0.90%

59

Source: Bloomberg, data as at 09/01/20

The Nuance

After a positive end to 2019, in which investors experienced significant returns to their portfolios, market positivity was checked in the second trading week of the year with geopolitical factors, once again, impacting on assets prices. Despite threats of severe retaliation, Iran is limited in what it can do in response. US sanctions have hobbled the Iranian economy and any action that would trigger a conventional war with the US is clearly not in Iran’s interests. The key now is whether geopolitical risks can subside enough for attention to shift back toward the economic outlook. The US-Iran tensions are developing against a backdrop of an improving picture for global trade, with a Sino-American trade deal expected to be signed next week

Despite a slowing global economy, it feels like there’s a lot to be optimistic about in 2020. While there are geopolitical issues at large across all continents, the Manager can already see them giving rise to longer-term investment opportunities. From the infrastructure opportunity that comes with a growing urban population, to the health care opportunity of an ageing demographic and the renewable energy opportunity of climate change. There’s no doubt we’re on the cusp of phenomenal global change, and that’s without mentioning the impact of technological advancement and the rise in sustainable products and services.

Of course, significant change can feel painful in the short term – whether that’s because of political uncertainty or volatile markets. Which is why the Manager will continue to diversify both globally and across different asset classes to protect clients from short-term fluctuations, while making sure it can take advantage of any exciting longer-term opportunities as they arise.

Quote of the week

“I don’t think any of the other people who filled out the form have any psychic powers, but I’m not 100% sure.”

Uri Geller, Celebrity Magician

Professional spoon bender Uri Geller made headlines this week when he applied for a job in the UK Government. The role, advertised by Dominic Cummings (special adviser to Boris Johnson), called for ‘weirdos and misfits’ to apply, complaining that the civil service lacked genuine cognitive diversity and the Israeli illusionist duly obliged. Pleading his case, Geller said he had used his powers to help Johnson win last month’s election by giving his aides a spoon enthused with positive energy and claimed he had previously used his skills to erase crucial diplomatic discs on their way to Moscow. However, Cummings and Johnson might not be impressed with Geller’s previous Brexit involvement, after he called upon Britons in March 2019 to stop the process altogether by twice-daily bursts of mass-telepathy.

Source: https://uk.reuters.com

Source: Sanlam Private Wealth

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