In October, both global financial markets and politics have been firmly in the public eye.
Here in the UK, Chancellor Phillip Hammond’s ‘last Budget before Brexit’ declared the “era of austerity is finally coming to an end”. Amidst other announcements was a new Digital Services Tax – openly targeting the issue of global technology firms that, due to complex tax rules, pay little to no UK corporation tax. The 2% charge will be levied on the UK revenues of tech giants like Amazon, raising an estimated £400 million extra a year.
Glancing at the USA, it seems that no sooner has one political dispute dissipated, another quickly rears its ugly head. Iran is the latest country in Trump’s crosshairs, promising to impose a new slew of economic sanctions in retaliation of Iran’s missile programme.
Not one to miss out, Europe has also had its share of the headlines. Firstly, German Chancellor Angela Merkel is to step down as long-standing chair of her political party, the Christian Democratic Union and will not run for re-election as the Chancellor in 2021. Elsewhere, Italy’s budget standoff with the EU commission remains unresolved, causing palatable caution across home markets. And, of course, there are the ongoing Brexit negotiations.
Stock markets worldwide endured a tricky month, a reflection of investor concerns about the prospects for market growth given the continuing global trade frictions between the US and its trade partners, notably China.
US markets declined -6.8% despite the bulk of US companies reporting better than expected Q3 2018 results. Large US tech stocks bore the brunt of negative sentiment; Netflix saw -19.4% knocked off its share price in October, despite adding nearly 7 million new subscribers in the previous quarter.
UK markets fared slightly better than their US counterparts, with the FTSE 100 index losing just 4.8%. This is due in part to the UK index featuring fewer tech companies and several utility and pharmaceutical companies – two sectors that are typically less impacted by changes in global growth.
Despite the tough month, some global stock markets managed to bounce back significantly from their mid-month lows, fuelled by an improvement in investor sentiment.
In corporate news, UK-listed Randgold Resources’ share price enjoyed a 12.8% gain, following the announcement of a merger with Canadian gold miner, Barrick Gold. The deal is expected to create a “gold mining superpower”.
The Pound’s performance was mostly weak compared to major global currencies: down -0.54% against the US Dollar, -0.53% against the Euro, and -2.88% against the Japanese Yen.
Investment type performance breakdown
In line with the performance of global financial markets this month, the investments in your plan had a difficult month, for the most part. Commodities (-1.93%) and shares (-6.92%) finished the month lower. Property was relatively unchanged (-0.1%) and bonds (+0.15%) managed a small positive performance, against the grain.
Summary with Plan details
It’s been a challenging month for all investors, however, it’s important to understand that months like this are par for the course and an essential part of a healthy functioning market.
We believe the outlook for investors with a medium-to-long-term horizon remains optimistic. As such, we’ve decided to take advantage of the recent downturn to buy more shares for your investment plans using the cash reserves and proceeds from the sale of some bonds. We see the recent stock market dips as an opportunity to add to some of our favourite markets, Europe and Japan, which our analysis suggests offers the most attractive prospects for investors.
Our investment team always remain focused on keeping your investment plan on track and will be ready to act as opportunities arise.
Figures shown are based on a medium-risk (Confident) investment Plan.
Your investments can go down as well as up and you could get back less than you put in.
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