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January 2020 - Market Update

| Market Commentary | By James Timpson

December rounded off what has been a lucrative year for global equity markets. Despite some wobbles along the way, many of which were a result of the ongoing trade negotiations, the MSCI World Net Total Return index had its best year since 2013, putting on +27.34%. Of the major markets, the US was the biggest winner of the year, with the S&P 500 index returning +31.49%, once again boosted by the performance of tech stocks, as the S&P 500 Information Technology index grew +48.04%.

In the UK, the first December general election since 1923 took place, and the Conservatives led by Boris Johnson won with a comfortable majority: 365 seats versus Labour’s 203 seats. The victory for the Tories was more resounding than markets had been expecting, as the FTSE 250 index, which measures medium sized UK companies, surged +3.44% on the day of the results. The pound also spiked, at one point reaching its highest level against the dollar since May 2018.

A full round-up of December market performance

In the UK, the FTSE 100 index rose +2.78%, while medium and smaller companies, measured by the FTSE 250 ex IT index and the FTSE Small Cap ex IT index, soared +5.86% and +7.85% respectively. In the US, the S&P 500 index gained +3.02%, while in Europe the Eurostoxx 50 index climbed +1.22%. Japanese stocks measured by the Topix index lifted +1.45%.

Emerging market returns were also positive, as the MSCI Emerging Markets index put on +5.80%. Chinese equities measured by the MSCI China index surged +7.91% while Latin American equities, measured by the MSCI Latin America index, increased +5.43%. Indian stocks measured by the IISL Nifty 50 PR index were up +0.93%.

In the fixed income market, UK government bonds, measured by the FTSE Gilts All Stocks index, slipped -1.33% and long dated (over 15 years to maturity) gilts lost -2.35%. European corporate bonds, measured by the Markit iBoxx Euro Corporates index, dropped -0.06% while sterling denominated corporate bonds, measured by the Markit iBoxx Sterling Corporates index, nudged +0.08%. In the high yield market, the Bank of America Merrill Lynch Euro High Yield index and the Bank of America Merrill Lynch Sterling High Yield index picked up +1.07% and +1.21% respectively.

Commodities had a strong month. The S&P GSCI index, which consists of a basket of commodities including oil, metals and agricultural items, returned +6.99%. The price of a crude oil futures contract rose +10.74%. In the agricultural markets corn rose +1.70% and wheat gained +3.14%. The precious metals performed well as the S&P GSCI Gold and Silver indices captured +3.56% and +4.91% respectively.

In the currency markets, the pound appreciated against most major currencies, including the dollar (+2.57%), the euro (+0.74%) and the yen (+1.81%).

James Timpson CFA, BSc (Hons), IMC
Analyst


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