December was another volatile month for markets across the world which continue to be affected by the current global economic environment. As the Brexit talks move through their final stages, the UK market was especially volatile, with the perceived balance of possible outcomes ever changing and causing wider than normal fluctuation in performance.
Although the UK stock market has remained preoccupied by the ebbs and flows of the Brexit debate, the UK economy has continued to produce strong data. Towards the end of 2018, we have seen further positive numbers on wage growth and employment, backed up by more good news on inflation. With the lowest unemployment since the 1970s, strong growth in employment and hours worked, combined with the fastest real wage growth since the financial crisis, we enter 2019 with strong economic momentum in the UK.
The rest of the world economy is looking less robust. China is visibly slowing, emerging economies continue to struggle with the strength of the US dollar, borrowing costs, and Europe has slowed significantly. This isn’t helped by the current weak oil price, with much weaker growth in demand growth than expected, as well as more robust growth in supply.
The US economy is still visibly strong but the waning fiscal stimulus (tax cuts to incentivise public spending) and the effects of increasing interest rates, are combining to challenge policymakers and financial markets. Bond investors appear to be pricing in a much more challenging economic environment and the correction that appears to have started in the equity market is another warning of more troubling times ahead and possible recession
As we have previously discussed, the key with stock market volatility is not to over-react. Share prices will fall and rise and it’s important not to be ‘out of the market’ at the wrong time as this can be costly to your overall capital values.
We believe investors should remain focused on the medium to long term, investing over ‘time’, rather than trying to ‘time the market’. Ongoing management your financial plan and investments remains important and generally volatility can be partially mitigated by diversifying investments suitably across a broad range of asset classes that include equities, commercial property funds, fixed interest securities (bonds) and cash.
For clarification of any points discussed above and any future independent advice regarding your own financial planning, please do contact us on
01626 833225 or email [email protected]
The views and opinions contained herein are those of Loughtons Independent Financial Advisers and may not necessarily represent views expressed or reflected in other economic communications, strategies or funds.
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