Imperium Capital Publication

Viewpoint – December 2018

Following the steep falls in October, a degree of stability returned to markets in November, but not without some considerable volatility during the month. Late in the month a more dovish speech from Federal Reserve Chairman Powell, together with hopes of some thawing of the US-China trade wars helped markets to post gains, led by emerging markets in Asia, up 5.2% in November, and the US, up 2.0%. This enabled the MSCI World Index to produce a gain of 1.1% and the MSCI Global emerging markets to gain 4.1% for the month.

The progressive removal of post crisis ultra-loose monetary policy, especially by the Fed, and the increasing evidence of a slowdown in global trade and growth, were the main drivers of markets. The US economy has remained buoyant, but the key housing sector is showing clear signs of slowing, with home sales down for the 6th consecutive month and other indicators pointing in the same direction. As the Fed has tightened policy the cost of finance has risen – the 30-year mortgage rates have increased by 1.5% over the past 2 years to around 5.0% – and has had a direct impact on costs to home buyers. Capital goods orders have also been softer, hurt by concerns about weaker growth globally.

Viewpoint – November 2018

Once again, the month of October delivered a torrid time for investors, leaving the goldilocks environment of 2017 dead and buried. In a sharp reversal of fortunes, which began at the end of September, very few asset classes produced a positive return in October. The classic safe-haven assets including government bonds, gold and the Japanese Yen produced positive returns, with the notable exception of US Treasuries posting a negative return of 0.5%. The equity market suffered the brunt of the selling, led by the Asian equity market falling over 10% in the month, while most other regions fell 7-9% in US Dollar terms. Despite a bounce in the final days of the month, the MSCI World Index declined 7.3%, a slightly smaller fall than the 8.7% decline in Emerging Markets.