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COURTIERS Comments on February 2017 Markets

03 March 2017  15:13 GMT    James Timpson

Theresa May’s end of March deadline for triggering Article 50 and commencing Brexit talks is fast approaching, and last month the Government published a much-anticipated White Paper outlining the plans for Brexit. The paper focused on the twelve key ‘principles’ set out by May to guide the government through negotiations. These include protecting workers’ rights, controlling immigration and ensuring free trade with European markets.

Elsewhere in politics, a by-election in Copeland, Cumbria resulted in a historic win for Trudy Harrison of the Conservative party. The area had been represented by the Labour party for more than eighty years. Meanwhile UKIP leader Paul Nuttall’s campaign to win the Stoke-on-Trent Central by-election proved unsuccessful as it was held by Labour’s Gareth Snell.

In the US, Donald Trump continued to cause controversy in the White House. An unscheduled press conference to announce Alexander Acosta as his new choice for labour secretary turned into mayhem as Trump claimed he had ‘inherited a mess’ and blasted the media for allegedly publishing ‘fake news’. A week later several major press outlets including CNN, the New York Times and the BBC were banned by the White House from attending another press briefing. Despite the controversy, US financial markets have remained strong, with the S&P 500 index reaching a new all-time high.

One of the largest food companies in the US, Kraft Heinz has abandoned its bid to take over the Anglo-Dutch consumer goods giant Unilever. The Marmite manufacturer had previously rejected an offer worth $143 billion. Had the deal gone ahead, it would have been one of the biggest in corporate history.

February was a strong month for developed equity markets. In the UK, the FTSE 100 index rose +3.09% while the FTSE 250 (ex IT) index and the FTSE Small Cap (ex IT) index picked up +3.47% and +0.89% respectively. In the US, the S&P 500 index gained +3.97% while in Europe the Eurostoxx 50 index grew +2.92%. Japanese equities, measured by the Topix index, ended the month up +0.94%.

Emerging market returns were also positive. The MSCI EM (Emerging Markets) index saw an increase of +1.69%. Chinese equities, represented by the MSCI China index, gained +3.57% and Latin American equities, measured by the MSCI EM Latin America GR index, gathered +2.00%. The IISL Nifty index, which measures Indian equity returns, jumped +3.72%.

Global bond markets performed well last month. UK government bonds, measured by the FTSE Gilts All Stocks index, rose +3.08%, and long dated (over 15 years to maturity) gilts surged +5.13%. In the corporate market, European corporate bonds, measured by the Markit iBoxx Euro Corporates index, were up +1.21% and sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, increased +2.61%. In the high yield markets, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index returned +0.95% and +1.60% respectively. Emerging Market sovereign debt, measured by the JP Morgan EMBI Global index, gained +2.08%.

Commodities also had a strong month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, grew +0.23%. The price of a crude oil contract went up +1.10%. Agricultural returns were positive, as corn and wheat gained +1.84% and +2.36% respectively. The precious metals also saw positive returns, as the S&P GSCI Gold and Silver indices lifted +3.55% and +4.92% respectively.

In the foreign exchange markets, the US dollar and the yen appreciated against the pound by +1.58% and +1.61% respectively, while the euro slipped -0.48% against the pound.

(All the above returns are reflected on a local currency basis i.e. they do not factor in any relevant currency movements. Unless accompanied by PR (Price Return), they do include income).

Video Transcript

Following the resignation of Labour’s Jamie Reed, there was a by-election in Copeland last month. In a historic result, it was the Conservative candidate Trudy Harrison that was declared the winner. The Labour party had previously represented the area for more than 80 years.

The same day, UKIP leader Paul Nuttall lost in his bid to win the by-election in Stoke-on-Trent.

As for Brexit, Teresa May’s deadline for triggering Article 50 is fast approaching, less than a month away now and last month, she published the much anticipated White Paper outlining the government’s plans for Brexit.

The paper focused on the 12 key principles laid out by the PM to aid the government in their negotiations. These include controlling immigration, protecting workers’ right and ensuring free trade with European markets.

Donald Trump’s been causing more mayhem in the White House and his latest target has been the media. During an unscheduled press conference last month to unveil his new choice as labour secretary, he ended up having a go at the media for publishing fake news and doing a disservice to the American people.

He went on to ban several major outlets from another press briefing including CNN and the BBC. While Trump’s presidency has been the cause of much political anguish, financial markets have remained strong. Since Trump was elected back in November, the S&P 500 index has surged upwards by more than 10%.

It’s been a positive month all round for global financial markets. In the UK, the FTSE 100 index gained 3.1% and in the US, the S&P 500 index was up almost 4%. The Eurostoxx index rose 2.9% and emerging markets picked up 1.7%. Bonds have performed particularly well with UK Gilts rising 3.1% and sterling-denominated corporate bonds returning 2.6%. In the foreign exchange markets, it was a fairly mixed month for sterling as the US dollar gained 1.6% against the pound while the euro depreciated by 0.5%.

Next week, Chancellor Philip Hammond will deliver the last ever Spring Budget as after this one it’s moving to the Autumn. He’ll be setting out the government’s plans for the economy and providing us with the latest economic forecasts. We’ll be listening closely and providing updates throughout so be sure to check us out on social media.

Meanwhile, Brexit and Donald Trump’s presidency are still key focal points. We maintain a fairly cautious outlook in our multi-asset funds. We still have protection against a decline in the US markets. With markets rising it’s fair to say we haven’t needed it yet, but you never know when that may change.

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