In December, Theresa May postponed a House of Commons vote on her proposed withdrawal deal because of opposition from Eurosceptic MPs. Due to the lack of clarity around Brexit, business confidence has been hit, leading to three consecutive quarters of falling investment.
Elsewhere, there may be blue skies on the horizon for China and the US. The Chinese government announced its intention to ban local governments from forcing foreign companies to transfer proprietary technology* to their Chinese partners, a complaint at the heart of the US-China trade dispute.
In Europe, political unrest in the form of the French “yellow vest” protests and difficulty in striking the EU-Italian budget have overshadowed economic growth. Meanwhile, the European Central Bank (ECB) announced an end to its bond-buying programme known as quantitative easing, citing there is no longer a need to pump new money into the economy.
Despite a positive November, December’s fortunes weren’t as bright, with no major stock markets producing a positive return. In the UK, several factors contributed to markets finishing down (-3.40%) last month.
Lower oil prices (-10.84%) didn’t help (again), and neither did British American Tobacco Plc, which ended the month once again lower (-8.33%) leaving a nasty taste in investors’ mouths.
As well as tobacco and oil, pharmaceuticals, banking utilities, insurance, telecoms, and retail all recorded poor performances, helping to pull the market down yet further.
US markets were one of the hardest hit of the major global stock markets (-9.81%), largely driven by the FAANG (Facebook, Amazon, Apple, Netflix, and Google), who shed on average -8.37% from their value last month.
Apple lost -11.67% from its share price as the company reduced revenue expectations for the first time in 16 years, blaming a slowdown in demand from China. Analysts however suspect there is more to the story and perhaps the steep 20%+ hike to its iPhone price might also had something to do with it.
Worldwide, stock markets including Emerging Markets (-3.05%) and Asia Pacific (-5.90%) achieved returns broadly in line with western markets.
Japan had the toughest month of all developed markets (-10.33%). Contributing factors include Japanese Prime Minister, Shinzō Abe continuing his controversial economic reform policies (also known as Abenomics) and heightened global risk aversion which has a particularly pronounced effect on Japan’s (the world’s third largest economy) stock market.
The British Pound’s performance varied against other major global currencies. There was little change compared to the US Dollar (+0.04%), it was a little weaker compared to the Euro (-1.29%), and a lot weaker against the Japanese Yen (-3.50%).
A strengthening Yen is another indicator of a decline in investor confidence globally, as it is typically known to go up in value during periods of market volatility.
Investment type performance breakdown
The majority of investment types in your Plan this month were low. Commodities (-2.18%), shares (-5.32%) and property (-5.19%) were down and bonds (that typically perform well when shares and other riskier assets aren’t doing so well) closed the month up by only +1.52%.
Summary with Plan details
If timing the market was easy, everyone would be a successful investor, but in truth, it’s incredibly difficult. This is why investing is a long-term commitment. Read our blog about Time in the market vs Timing the market.
2018 was a tough year for financial markets. But with volatility comes opportunity and our investment team will always remain focused on keeping your investment plan on track and will be ready to act as opportunities arise.
* Proprietary technology is a combination of processes, tools or systems which have copyright all belonging to one person or company and they need each other to work. Think of things like Microsoft Windows, Adobe Flash, iTunes, Skype, etc. They all need specific system requirements in order to work.
Figures shown are based on a medium-risk (Confident) investment Plan.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.