This month markets have shown political unrest is no match for central bank stimulus. We have seen a large increase in the European Central Bank’s (ECB) bond purchase programme as it added €600bn to take the total to €1.3trn while in the UK government debt to GDP breached 100 per cent for the first time in nearly 60 years.
In the UK, it was also revealed that the UK economy shrank by 20 per cent, the decline was led by a sharp drop in construction output, as well as steep falls in retail sales, transport and hospitality. Both the size and breadth of the contraction was eye catching, with almost all sectors of the economy showing a decline over the 3-month period. Add into the mix the classic no-deal Brexit talk, and it means we are in a precarious position.
Elsewhere, in the US, the Fed chairman gave a fairly negative assessment of the economic outlook resulting a sell-off mid-week. A recent uptick in Covid-19 cases in the US correlates with the easing of lockdown and talk of a second wave has started before the first wave has even passed. Overall, the cost of slower economic recovery was reflected in the International Monetary Fund’s revised economic forecast for 2020, with a now global GDP contraction of 4.9% rather than the 3% contraction predicted in April.
| Asset Class | Proxy | 1-month return | 3-month return | 6-month return | 1yr return |
| Cash | UT Cash/Money Market | 0.03 | 0.06 | 0.7 | 0.14 |
| UK Corporate Bonds | UT UK Fixed Interest | 0.13 | 4.84 | 9.83 | 11.08 |
| Emerging Market Equities | MSCI Emerging Markets | 8.04 | 19.7 | -4.21 | 0.09 |
| European Equities | MSCI Europe | 4.91 | 18.7 | -7.27 | -3.26 |
| Gilts | FTSE Gilts All Stocks | -0.3 | 1.84 | 8.45 | 11.5 |
| Japanese Equities | MSCI Japan | 0.2 | 8.9 | -1.28 | 6.36 |
| Property | UT Property | 0.9 | 8.81 | -11.7 | -5.92 |
| UK Equity | FTSE All-Share | 2.37 | 14.2 | -17.8 | -12.3 |
| US Equities | S&P 500 | 1.17 | 21.4 | 1.26 | 9.18 |
*The value of your investment can go up as well as down, you may get back less than you originally invested. Circumstances are subject to change.
Performance from the past or yields quoted should not be considered as reliable indicators of returns. This communication is for general information only and is not intended to be individual advice.