NEWS & ANNOUNCEMENTS One half gone: the best first half ever for global markets? 8 July 2019

The final quarter of 2018 saw a drop in world markets which took many investors by surprise. In contrast, the first quarter of 2019 produced a bounce back.

That rally continued more modestly into the second quarter. The result is that the first half figures shown below paint a rosy picture which, according to Reuters, could well be the best first half ever for global markets.

A few points to note are:

• The UK market recovery slowed in the second quarter, but considering all that has happened in Brexit terms a positive result was arguably surprising. The yield on the FTSE All-Share ended the quarter at 4.13%, making the UK still look relatively cheap. The corollary is that dividend cover has shrunk further to 1.41, down from 1.91 at the end of last year.

• The US market faced its own headwinds with the ramping up of the China trade war. However, Wall Street has been helped by the Federal Reserve, which now looks likely to cut interest rates in July. The market consensus has moved towards the possibility of three rate cuts by the year end, although that might prove optimistic if the latest weekend cooling down of the US/China trade dispute lasts beyond Trump’s next few tweets.

• Despite the various economic worries (Italy, Germany, Brexit…), the Eurozone markets performed well. As in the US, there was central bank assistance, with the ECB changing its no rate change signal from the end of 2019 to summer 2020 and hinting at further monetary assistance.

• Emerging markets joined the recovery, although their performances were by no means consistent. China fell in the second quarter as trade wars took their toll.

COMMENT

Whether or not it was the best first half ever, it was certainly a better performance than nearly anyone would have predicted in the gloomy days of late December.