Quarter Two Market Review

Hello, we hope that you are all having a wonderful summer.

Please find below extracts from the IronMarket Investment Management Team Review in July 2019 of Quarter Two 2019 (1 April – 28 June).

Looking Back

Global equity markets generally performed well over the second quarter, though not without a significant bout of volatility during May.  This was prompted by continuing concerns over the US-China trade war, though stock markets were supported by increasingly accommodative posturing by the globe’s central banks and hopes of progress in trade tensions by the end of June. Following a positive Q1 for global equities Q2 continued this trend, confirming a strong rebound from the last quarter of 2018.

Government bond yields fell markedly as prices rose, reflecting expectations that central banks would keep monetary policy loose, including the possibility of rate cuts. At their mid-June meetings, comments from the Fed and ECB confirmed the growing dovishness among policymakers, with both clearing the way to further policy measures if required.

Corporate bond markets delivered strong returns and outperformed government bonds over the period.  Credit drew support from falling yields (bond prices rise when yields fall). Higher quality investment grade (IG) bonds saw better returns than high yield (HY) as they tend to benefit more from falling yields.

Looking Forward

Global equity and bond markets continue to undergo bouts of increased volatility as investors fret about trade tensions and growth of the world economy. Forward looking surveys painted a mixed picture during the last quarter, with the Purchasing Managers Index (PMI) falling below 50 in the UK, suggesting a future economic contraction may be around the corner. In Europe, the PMI reached a seven-month high of 52.7, though the index has service and manufacturing elements and the latter remained at a level that indicates that it is shrinking.  In the US, GDP growth of 3.1% was as expected though the continuing volatile stance of President Trump’s US Administration towards China and others regarding trade deals continues to affect investor sentiment. There seems little evidence that this will change anytime soon, but we are encouraged that the central banks seem to have policy changes lined up to mitigate any negative effects. UK equity markets are looking cheap relative to their developed market counterparts, though this is largely because of the uncertainty surrounding Brexit, currently due to occur at the end of October.

We feel that with solid investor gains having been made during the first half of 2019, we will see a more subdued performance during the second half of the year, possibly low single-digit returns. Given the length of the current economic cycle (the longest period of US growth on record), we also expect regular bouts of volatility to affect equity and bond markets during the remainder of the year. However, it seems that central banks are readying to provide accommodative policy changes if required (lower interest rates/more quantitative easing) that should steady market behaviour in the months ahead.

How did we Do in Quarter Two 2019?

3 months to June 30th

What does that look like?
All Portfolios Quarter Two 2019

‍ All Portfolios Year to Date

All Portfolios Since October 2014

‍So, What Next?

The team at IronMarket Investment Management meet at least monthly in a formal manner but work together daily reviewing & analysing market & economic data. In the middle of June this year we made substantial changes to portfolios bringing in more active managers that have excellent recent and long-standing records in their area of expertise. For example, given the uncertainty in the UK of when, how or even if Brexit happens, we’ve deployed three specialist managers that operate in the large-cap, medium cap, and small-cap sectors as they offer a better diversification to the possible outcomes of our forthcoming departure from the EU. The consistency of these managers’ stock picking skills has been well documented over extended periods and that this will provide some protection to the volatility that is likely in sterling (currency) leading up to the departure date and beyond.

Our next formal update will be in October, however, as always, we will keep you updated in the meantime and should you have any questions queries or concerns, please contact your IronMarket Financial Planner in the first instance, however as one group, our Investment Management Team are always available to offer further insight into anything related to your investment portfolios or wider economic or investment related queries.

Want to know more?

If you are not currently a client of our Discretionary Portfolio Management Service, and want to know more, again please speak with your IronMarket Financial Planner in the first instance who can discuss this with you

Wes Wilkes
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