MARKET UPDATE: INFLATION, EMPLOYMENT AND RETAIL SALES DATA

MARKET UPDATE: INFLATION, EMPLOYMENT AND RETAIL SALES DATA TO PAVE WAY FOR UK RATE HIKE?

LAST WEEK – KEY TAKE AWAYS

Trump flies into the UK as May warns MPs not to put Brexit at risk

  • US president met with Theresa May to talk about Brexit, while also calling the EU a “foe” on trade.
  • A white paper published on Thursday outlined the UK government’s plans, advocating close links with the EU on trade in goods, but not in services.
  • Writing in the Mail on Sunday, May urged MPs to “keep their eye on the prize” ahead of a crucial Commons vote on trade and customs policy.
  • The Omnis view: Trump causes furore whether he goes, suggesting that European countries were taking advantage of the US and not paying their Nato bills. The prime minister, meanwhile, has a busy time ahead warding off any possible leadership challenge.

UK GDP growth rises to 0.3% in May

  • The UK economy strengthened in May, with growth of 0.3% from 0.2% in April, following a winter slowdown.
  • Growth was led by a strong services sector, including retail, computer programming and legal services.
  • The Office for National Statistics also calculated that gross domestic product (GDP) only rose by 0.2% in the March-to-May quarter, matching the growth of the first three months of the year.
  • The Omnis view: this was the ONS’ first monthly estimate of GDP, which presents a mixed picture of the UK economy. We expect continued slow, but steady, growth in the months ahead.

Mixed results for banks as US earnings season kicks off

  • JPMorgan and Citigroup both beat expectations for second-quarter profits on Friday, a big day for US bank results.
  • Wells Fargo saw second-quarter profits fall by 11%, in part caused by previous regulatory issues.
  • Global banks have recently been subject to Federal Reserve stress tests, designed to assess how well they could withstand another financial crisis – Deutsche Bank’s US division notably failed.
  • The Omnis view: the health of the banking sector is important as this sector makes up a big part of stockmarkets in the US and in the UK.

US inflation up 2.9% over 12 months

  • The Consumer Price Index (CPI) came in at 0.1% for the month of June, with the annual figure coming in at 2.9%, which is the highest since December 2011.
  • Excluding the volatile food and energy sectors, core CPI rose 0.2% for the month. Annually, this core figure is 2.3%.
  • The Federal Reserve is forecasting that its favourite measure of inflation, the Personal Consumption Expenditure Price Index, will remain at 2.1% this year.
  • The Omnis view: the Federal Reserve said on Friday that it expects rising inflation and low unemployment will keep it on track to raise interest rates at a gradual pace over the next two years. Two more hikes are projected in 2018.

Chinese economy growing at slowest pace since 2016

  • The second-quarter growth rate for China was 6.7% year-on-year, slowing from 6.8% for Q1.
  • The current pace of growth still remains above the government’s annual growth target of 6.5%.
  • Asian stocks were mostly trading lower on Monday in reaction to the data.
  • The Omnis view: it is clear China is slowing, though 6.7% growth is still the envy of other nations. The impact of trade disputes with the US will likely be felt in the second-half of this year.

Looking ahead – TALKING POINTS

Inflation, employment and retail sales to shed light on UK economy

  • Inflation remained steady at 2.4% in May, despite a rise in oil prices. Forecasters expect the Consumer Price Index to rise to 2.6% for June.
  • Wages will be in the spotlight ahead of the Bank of England’s Monetary Policy Committee meeting on 2 August.
  • Following two consecutive months of strong retail sales growth, there could be further good news for the UK’s embattled high street.
  • The Omnis view: the Bank of England’s Monetary Policy Committee is expected to raise the base interest rate from 0.5% to 0.75% in August, though poor data this week could put that move in doubt.

UK inflation rate (%) – June 2017 to May 2018

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Source: Office for National Statistics, tradingeconomics.com

Powell testimony will give clues to future US monetary policy

  • Federal Reserve chair Jay Powell is set to deliver his semi-annual testimony on the US economy and monetary policy to a Senate committee on Tuesday morning.
  • This should support expectations of a 25bp rate hike at the Federal Open Market Committee’s September meeting.
  • The median estimate of projections put rates at 3.1% at the end of 2019, and 3.4% at the end of 2020.
  • The Omnis view: The market still expects Powell to raise rates much slower than he has indicated. Any hints at this in his testimony will be taken positively.

US Fed Funds Rate –  2013 to 2018

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Source: Federal Reserve, tradingeconomics.com

 The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

 

Market Update: Unemployment data to give clues on Macron’s progress one year on

Market Update

LAST WEEK – KEY TAKEAWAYS

Key questions for Italian economy as new coalition government imminent

  • Five Star Movement and anti-immigration League close to clinching a deal to lead the country after 10 weeks of political stalemate.
  • Uncertainty around the future of the Italian economy leads to volatility in the country’s equities and bonds.
  • Leak of coalition’s draft plan shows proposals to ask the European Central Bank to write off €250bn of debt as well as to set up procedures allowing EU member states to exit the euro.
  • The Omnis view: it is hard to see what impact a partnership between two very different political forces will have on the Italian economy, though we are encouraged that volatility has so far been contained to domestic assets.

Commodities boost helps FTSE 100 hit new record high

  • Strong oil prices help FTSE 100 push to record high closing of 7,787 points on Thursday 17 May.
  • BP and Shell among the winners, while a weaker sterling has also been a boon to companies with big overseas business.
  • The price of oil has hit its highest level since November 2014, in part because of Donald Trump’s decision to exit a nuclear deal with Iran, a major exporter.
  • The Omnis view: UK equities have bounced back strongly from a downturn earlier in the year. However, we remain cautious on the asset class based on Brexit uncertainty.

UK employment at record high while wages climbing faster than inflation for first time in a year

  • Office for National Statistics reports that employment has climbed to a new high of 75.6% with the jobless rate at 4.2%.
  • UK wages climbed at an annual rate of 2.9% in the first three months of the year, with the latest inflation figure at 2.5%.
  • Average total pay was £515 a week in nominal terms, before tax and other deductions, for UK employees in March.
  • The Omnis view: this is encouraging news for UK workers, though real term wage growth of 0.4% is still very low and its remains a challenging time for consumer spending.

Mixed news for Japan as economy shrinks, but wage growth on the rise

  • World’s third-largest economy contracted at an annualised rate of 0.6% in first quarter of 2018 as consumption and capital expenditure slowed.
  • On a quarter-on-quarter basis, the economy shrank 0.2% compared with growth of 0.1% at the end of 2017.
  • However, wages increased by 2.1% year-on-year on the back of tight labour conditions.
  • The Omnis view: this is the first time in two years that the economy has shrunk, though many of its listed companies remain in good health and have contributed to strong performance from the Omnis Asia Pacific Equity Fund in particular.

Doubts over Trump and Kim Jong-un summit as Pyongyang gets edgy

  • North Korea has threatened to abandon historic leaders’ summit as it accuses the US of putting it “into a corner” on nuclear disarmament.
  • But Washington officials say preparations still underway for meeting in Singapore on 12 June.
  • North Korea has also cancelled high-level talks with its southern neighbour, angered by continuing US-South Korea joint military exercises which it sees as a rehearsal for invasion.
  • The Omnis view: June promises to be a vital month for US diplomatic relations with Asian countries, given the meeting in Singapore as well as ongoing trade negotiations with China.

Looking ahead – TALKING POINTS

Unemployment data a sign of Macron’s progress one year on

  • Analysts are looking for any changes to the 8.9% unemployment rate in France, registered at the end of 2017.
  • A year into the job as president, the jury is still out on Emmanuel Macron’s efforts on economic reform.
  • Labour laws passed in September 2017 allow companies to reach deals with workers rather than comply with industry wide rulings on working hours, pay and overtime.
  • The Omnis view: unemployment levels remain high in France, particularly among the young, with many workers on limited-time contracts. Macron must work to address the problem if the economy is to thrive.

France unemployment rate (%) – February 2015 to January 2018

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Source: Insee, France, tradingeconomics.com

Fed minutes to reveal pace of future rate hikes?

  • The minutes from the Federal Open Market Committee (FOMC) meeting will give investors insight into its recent decision to hold the federal funds rate at 1.5-1.75%.
  • By the end of 2018, would we have seen three rate rises or four? It depends on the view on inflation and the overall health of the economy.
  • Markets are pricing in a 96.7% probability that the central bank will hike rates again at its June meeting.
  • The Omnis view: given the size of its economy, the pace of interest rate rises in the US is of huge significance globally, particularly if there were to be a policy mistake.

US Fed funds rate (%) – January 2015 to May 2018

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Source: Federal Reserve, tradingeconomics.com

 The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

MARKET UPDATE: RATE RISE ON THE CARDS IN THE US

Market Update

MARKET UPDATE: RATE RISE ON THE CARDS IN THE US, WHILE UK LIKELY TO HOLD FOR NOW

LAST WEEK – KEY TAKEAWAYS

Brexit transition deal agreed

On Monday (19 March) it was announced that the UK and EU have agreed terms for the Brexit transition period next year, which lasts from ‘Brexit day’ on 29 March 2019 until 31 December 2020. After several days of talks, the two sides reached a compromise with the EU to allow Britain to sign its own trade deals during the transition, and the UK giving full free movement rights for EU citizens who arrive during the period.

UK growth upgraded in Spring budget

Chancellor Philip Hammond used his Spring Statement to unveil upgraded UK growth forecasts. Office for Budget Responsibility (OBR) figures have revised the UK gross domestic product (GDP) forecast for this year upwards from 1.4% to 1.5%. Government borrowing has also been revised down from previous estimates given last November. For 2017-18, the figure dropped from £49.9bn to £45.2bn, and the 2022-23 estimate is now £21.4bn down from £25.6bn. While the revisions were positive, they were only marginally so and had little impact on UK asset markets.

Putin landslide in Russian polls as relations with UK sour

Vladimir Putin secured a victory in Sunday’s Russian presidential election with more than three-quarters of the vote. He will lead the country for another six years. However, the election was not without controversy with main opposition leader Alexei Navalny barred from standing because of an embezzlement conviction, which he says was manufactured by the Kremlin. There have also been reports of irregularities at polling stations, with video evidence of officials stuffing ballots into boxes. Russian/UK relations have also hit a low amid accusations over the poisoning of ex-spy Sergei Skripal and his daughter in Salisbury.

You’re fired! Trump sacks US secretary of state Tillerson

Rex Tillerson, the US secretary of state, was the latest government official to be sacked by Donald Trump amid reports of disagreements over the country’s stance on issues such as North Korea and climate change. Trump’s chosen replacement is CIA director Mike Pompeo, who will need to be confirmed by the Senate. Tillerson joins a growing list of departures this year from the Trump administration, which includes chief economic adviser Gary Cohn, White House communications director Hope Hicks, White House staff secretary Rob Porter, and FBI deputy director Andrew McCabe.

US inflation steady while retail sales soften

The US core consumer price index (CPI) rose in line with expectations in February. The measure, which excludes volatile food and energy prices, came in at 1.8% higher for the month compared with 12 months’ previous. This was the same as the January figure. However, US retail sales fell for a third straight month in February, with the Commerce Department reporting a 0.1% slip. This was attributed to a cut back on purchases of cars and other big-ticket items.

Looking ahead – TALKING POINTS

Fed set to raise US interest rates

The Federal Open Market Committee (FOMC) of US Federal Reserve (Fed) meets on Wednesday with analysts overwhelmingly expecting a first interest rate rise for the year. A 25-basis point hike would put the Fed funds target rate range at 1.5% to 1.75%. The big talking point for markets remains how many rises are expected to come this year, three or four.

The Fed has said it expects inflation to move toward its 2% target by the end of the year. As outlined above, core consumer price inflation rose 1.8% in February, and a further pickup could push the central bank to raise interest rates faster. The Fed has recently come under the stewardship of new chair Jerome Powell, who took an upbeat view of the US economy when addressing Congress in February.

Following this week’s meeting, the Fed will release new economic projections and an updated ‘dot plot’ which shows the rate projections of the each of the FOMC’s 16 members. The December dot plot (shown below) suggested three rate rises this year. Currently, the average expectation is for rates to hit 2% to 2.25% by the end of 2018, and as high as 2.75% in the long run.

 

FOMC interest rate predictions – Sep-Dec 2017

dot-plot-dec-17_497x310_jpg

Source: Federal Open Market Committee, Business Insider

Big week for UK economic data

The Bank of England’s Monetary Policy Committee (MPC) will also make an interest rate decision this week though a hike is considered unlikely, for this month at least. According to Bloomberg data, investors believe there is just a 15.8% chance of a UK rate hike in March, compared with 62.6% probability of a rise in May (as at 19 March).

Updated employment data, due out this week, will likely play a significant role in informing the MPC’s decision. At last count, data for the last quarter of 2017 showed the jobless rate ticked up to 4.4% from a 42-year low of 4.3% previously. The second big determinant on interest rate decision making is inflation. Again, the latest data is due this week for the month of February, having stood at 3% in both December and January.

UK inflation (%) – Feb 2017 to January 2018

tuk_inflation_march_18_500x193_jpg

Source: Office for National Statistics, tradingeconomics.com

THE OMNIS VIEW

Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. The big economic story of 2018 so far is speculation around interest rate rises, both at home and abroad. It is the Federal Reserve in the US that has led the way with five rises so far since 2015, while the Bank of England has been more cautious with rates at just 0.5%. The European Central Bank is even further behind in the cycle, showing what a huge impact the financial crisis of 2008 and 2009 had on the health of major economies.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

MARKET UPDATE: UK SET FOR ANOTHER ‘SUPER THURSDAY’

Market Update

LAST WEEK – KEY TAKEAWAYS

Mixed news for UK economy…

Economic think tank, the EY Item Club, has upgraded its growth forecasts for the UK economy, lifting its gross domestic product (GDP) estimates for 2018 to 1.7%, up from the 1.4% predicted in October. It acknowledged that growth was better than expected in 2017, and it expects this momentum to carry into this year. However, the latest IHS Markit purchasing managers’ index (PMI) data for the manufacturing, construction and services sectors all disappointed for January. The surveys question firms on measures such as new orders, hiring and inventories to gauge the health of various sectors.

… As UK consumer confidence improves

UK consumers have started the year with a rosier outlook as the widely followed GfK consumer confidence index climbed 4 points to -9 in January. This was a boon to economists, who had predicted no change with the reading holding at -13. However, the index still remains in negative territory and is likely to stay that way while UK wage growth remains below inflation.

Eurozone on the rise

The eurozone continues to impress having grown at its fastest rate in a decade in 2017, according to Eurostat data. It reported that GDP expanded by 2.5% in the bloc last year, which represented the most rapid rate of growth since the 3.4% achieved in 2007. Further good news came from the latest composite purchasing managers’ index (PMI) from IHS Markit, which showed that output from private companies in the eurozone grew at the fastest pace for nearly 12 years during January.

US wage growth accelerates

Growth in average hourly earnings in the US registered at 2.9% for January. This was the strongest year-on-year gain since 2009 and, with the economy close to full employment, it suggests that employers are having to increase pay in order to attract scarcer labour.

German coalition talks pass another deadline

There was further progress in negotiations between the chancellor Angela Merkel’s CDU/CSU and the Social Democrats (SPD) last week, though the two sides missed their self-imposed deadline to forge a new government by Sunday. Discussions have already resumed this week, with the main talking points being disputes over healthcare and labour policy.

Looking ahead – TALKING POINTS

UK set for another ‘super Thursday’

This week, the Bank of England (BoE) takes centre stage for ‘super Thursday’ as its Monetary Policy Committee (MPC) will vote on whether to move interest rates, and we will also see the release of its quarterly inflation report and minutes from the MPC’s last meeting. The BoE is expected to hold interest rates at 0.5% for now, while the EY Item Club (as mentioned above) forecasts two rate rises later in May and November – the think tank expects rates to hit 1.25% in 2019.

Interest rate policy is the BoE’s primary mechanism for controlling inflation. The headline inflation figure stood at 3% in December, continuing to overshoot the Bank’s 2% target, though it is expected to fall back this year. Inflation has in part been caused by weakness in the pound, which led to increases in the cost of imports, but more recent strength in the currency should mean UK consumers begin to see slower price rises.

UK CPI inflation rate (%) – January 2014 to December 2017

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Source: Office for National Statistics, Tradingeconomics.com

Industrial production data due

Another widely watched measure of economic performance, industrial production data is due from Germany, France, Italy and the UK this week. The industrial sectors covered are manufacturing, mining and utilities, and although they often only contribute a small portion of a country’s gross domestic product (GDP), these are highly sensitive to moves in interest rates and consumer demand. As the eurozone’s largest economy, analysts are keen to see how well Germany is holding up – its industrial production rose 3.4% month-on-month in November, easily beating market expectations.

Italy’s output increased by 2.2% in the same month, while France is looking for a positive figure with its industrial production having shrank by 0.5%. On a year-on-year basis, the November figure for the UK was up 2.5%. Looking specifically at manufacturing, the Office for National Statistics reported last month that output is expanding at its fastest rate since before the financial crisis in early 2008.

UK industrial production index – December 2016 to November 2017

rsz_uk_industrial_production_500x189.jpg

Source: Office for National Statistics, Tradingeconomics.com

THE OMNIS VIEW

Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. For all the efforts of central banks, inflation has remained stubbornly low in the post financial crisis era. However, robust data – most noticeably in the US labour market – are beginning to challenge this trend. Having become accustomed to a low inflation and low interest rate environment, the market’s reaction to this challenge is likely to dictate investor outcomes over the coming months. The Omnis investment team continues to run diversified portfolios that seek to balance this risk against what, for the most part, remains an encouraging economic backdrop.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

Market Update

The first month of the year marked the first anniversary of Donald Trump as US President, his state of the union speech, the World Economic Forum in Davos, Switzerland and that interview… between Donald Trump and Piers Morgan… Trump’s first international broadcast interview.

The FTSE 100 ended January at 7,533.55, which was 2.0% lower than the 2017 year end closing figure of 7,687.77. During January, the index climbed to an intra-day high on 12 January of 7,792.56.

In the US, the Dow Jones Industrial Average continued its general upward momentum, closing January at 26,149.39. This was 5.4% above the 2018 opening level of 24,809.35 and was the tenth straight monthly gain, leaving March 2017 as its last losing month.

In terms of £ Sterling, it ended January at 1.41 US Dollars. This was 5.1% higher than the closing figure at the end of December of 1.35 US Dollars, and 15% higher than the closing figure in 2016 of 1.23 US Dollars.

Against the Euro, £ Sterling ended January at 1.14 Euros, which was slightly higher than the year opening rate of 1.13 Euros.

Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), was 2.7% in December 2017 (this is December’s data which is reported in January). This was down from the previous month’s rate of 2.8%. The 12-month rate for the Consumer Prices Index (CPI) rate which excludes owner occupied housing costs and council tax was 3.0% in December 2017, which was also down from the 3.1% in November 2017.

The increase in interest rates during November 2017 helped long-suffering deposit savers slightly. However, they continue to lose money in real terms when you consider the rate of savings interest compared to the rate of inflation.

The Omnis Managed funds, Openwork Graphene Model Portfolios and new Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities. Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.

We believe this multi-asset approach aims to give you the best opportunity for the highest level of return for your stated level of risk.

Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested.

MARKET UPDATE: YELLEN BOWS OUT

pablo Market Update

 

MARKET UPDATE: YELLEN BOWS OUT AS FED LAYS GROUND FOR MARCH HIKE

LAST WEEK – KEY TAKEAWAYS

US/China trade relations take centre stage at Davos

Leaders gathered for the World Economic Forum in Davos, Switzerland, last week. Understandably, there was much debate around the fortunes of the world’s two largest economies. Donald Trump was on the front foot with careful attention paid to the approval of broad tariffs on US imports of solar cells and washing machines, something which did not go down well among Chinese manufacturers. Trump is committed to these and other protectionist measures, which are designed to shield US-based businesses from the threat of cheaper overseas competitors. A key soundbite from Davos was Trump’s proclamation of “America First,” though he qualified: “(this) does not mean America alone. When the United States grows, so does the world”.

UK GDP up 0.5% for fourth quarter

The UK economy grew by 0.5% in the final three months of 2017, which was at a faster rate than many had anticipated. Analysts had expected the same 0.4% figure as was posted in the third quarter of the year. For the year as a whole, the Office for National Statistics (ONS) said growth came in at 1.8%, down from the 1.9% achieved in 2016.

UK wants to vet post-Brexit EU laws

Six weeks after EU leaders gave the green light for Brexit negotiations to move on to the future arrangements, tensions have reportedly surfaced over Britain’s desire to vet new EU laws agreed by the rest of the bloc during the transition period after Brexit on 29 March next year. A European Commission memo reportedly states that “significant divergences” remain on agreeing a process to resolve any future disputes about the Brexit deal.

Japan and eurozone leave interest rates unchanged

The Bank of Japan (BoJ) and European Central Bank (ECB) both decided to leave interest rates unchanged last week, as had been expected. BoJ policymakers voted 8 to 1 to keep monetary policy unchanged; its short-term policy rate is at -0.1% and the 10-year year yield target at 0%. As discussed last week, Japan has been buoyed by recent signs of economic strength, though inflation continues to run below target. Meanwhile, the ECB announced that there is “very few chances” any interest rate rises this year – the base rate is currently 0%. ECB chief economist Peter Praet said the bank would not stop its €2.55tn monetary easing programme unless it was confident that inflation is heading towards its 2% target.

Looking ahead – TALKING POINTS

Yellen bows out as US Fed preps for March rate hike

Janet Yellen will chair her last meeting of the US Federal Reserve this week, before she is replaced by Jerome Powell. No changes to policy are expected from Wednesday’s meeting, with Powell expected to preside over an interest rate rise in March, the first of three expected this year. Since the last Fed meeting in December, inflation has picked up – excluding food and energy the core consumer price index (CPI) increased 1.8% year-on-year and was up 0.3% during December.

The Fed is currently targeting a range of 1.25% to 1.5% for its benchmark interest rate, though this is expected to be hiked to over 2% during 2018. While last week’s temporary government shutdown brought negative headlines, US equities have registered their strongest start to the year since 1987. Investor sentiment has been buoyed by the approval of recent tax reforms, while healthcare and technology companies have been among the big risers.

US Fed funds rate (%) – January 2013 to December 2017

 

 rsz_us_int_rates_jan_18_499x195_jpg

A closer look at UK consumer confidence

Having dropped to a four-year low in December, investors will be hoping to see more positive data on UK consumer confidence this week. The latest GfK consumer confidence index data for January is due on Thursday, having fallen one point to -13 at last count. This is not the only measure of our appetite to shop, with a separate tracker from Deloitte released today (29 January) suggesting that consumer confidence remained flat during the fourth quarter of 2017 (a reading of -7%), compared to the same period a year earlier.

Deloitte’s survey of 3,000 people said that overall confidence rose in the second half of 2017 with record levels of confidence in relation to job security. Data for September to November last year, released by the Office for National Statistics (ONS) last week, showed some 1.44 million people out of work, meaning the UK unemployment rate remains at a four-decade low of 4.3%.

Deloitte consumer confidence index – Q4 2011 to Q4 2017

 

deloitte-uk-cc_500x258

THE OMNIS VIEW

Through a well-diversified approach to asset allocation, the Omnis investment team aims to defend and grow the value of your portfolio through market cycles. After four years as the Fed chair, Janet Yellen leaves behind a US economy in the middle of a hiking cycle, with full employment but with stubbornly low inflation. It’s a largely positive legacy, with US equities having shown sturdy growth during the period.

The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address:  Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority, 25 North Colonnade, London E14 5HS. Omnis Investments Limited does not offer investment advice nor make recommendations regarding investments. Potential investors are particularly advised to read the specific risks and charges applicable to the Funds which are contained in the Prospectus and Key Investor Information Documents (KIIDs).

Omnis Investments Limited is registered in England and Wales under registration number 06582314 (Registered Office: Washington House, Lydiard Fields, Swindon SN5 8UB).

Monthly Market Update

pablo Market Update

 

The bells rang and we moved into 2018 with the FTSE 100 closing at an all-time high. This is the second year in a row that the FTSE 100 has ended the year at its highest level.

The final session of the year saw the FTSE 100 close at 7,687.77, which was 4.9% higher than the November closing figure of 7,326.67.  This meant the index enjoyed growth of 7.6% in 2017, following its close in 2016 at 7,142.83.

Despite falling slightly in the final session, in the US, the Dow Jones Industrial Average continued its general upward momentum, closing the year at 24,719.22.  This was 1.8% above November’s closing level of 24,272.35 and was the ninth straight monthly gain, leaving March as its only losing month in 2017.

Over the full year, the Dow Jones Industrial Average enjoyed growth of an amazing 25.1% over its closing figure in 2016 of 19,762.60.

In terms of £ Sterling, it ended the year at 1.35 US Dollars.  While this was unchanged from the end of November, it was 9.5% higher than the closing figure in 2016 of 1.23 US Dollars.

Against the Euro, £ Sterling ended the year at 1.13 Euros, which was fractionally lower than the November closing figure of 1.14 Euros.  During 2017, the pound fell 4.1% against the Euro, having started 2017 at 1.17 Euros.

Inflation, as measured by the Consumer Prices Index including owner occupiers’ housing costs (CPIH), remained unchanged at 2.8% (this is based on November’s data which is reported in December).  The 12-month for the Consume Price Index (CPI) rate which excludes owner occupied housing costs and council tax, was 3.1% in November 2017, up from 3.0% in October 2017.  This is the highest it has been since March 2012.

The increase in interest rates during November helped long-suffering deposit savers slightly.  However, they continue to lose money in real terms when you consider the rate of savings interest compared to the rate of inflation.

The Omnis Managed funds, Openwork Graphene Model Portfolios and new Omnis Managed Portfolio Service provide you with a diversified asset allocation in line with your Attitude to Risk, investing in Developed Market Equities, such as UK, US, Europe and Asia Pacific as well as Emerging Market equities.  Cautious and Balanced investors will also have significant holdings in UK and Global Bonds, as well as Alternative Strategies.

We believe this multi-asset approach aims to give you the best opportunity for the highest level of return for your stated level of risk.

Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested.