Market Update January 2020

Markets Finish the Year on a High Note


Buoyed by a rise in optimism, in turn fuelled by factors such as

  • improved prospects around a US China trade deal
  • more certainty in relation to Brexit 
  • more good news about the performance of the economy in the US, bond and equity prices around the world rose strongly in the fourth quarter.

As we head into the new year, valuations are such that markets continue to be vulnerable and any disappointments are likely to lead to bouts of volatility. On the other hand, this is an election year in the US and Donald Trump will be keen to keep the news flow positive insofar as he can, knowing well that a strong stock market and a performing economy will greatly assist his chances of re-election.


In our view however, there are more reasons to be cautious than optimistic and further strong growth in markets does not seem a realistic prospect looking out over the year ahead.

Equities

As the table below shows, global equity markets were uniformly positive over the fourth quarter adding up to a very strong year overall. In fact, looking around the world it is difficult to find a market which did not follow this trend as investors took an increasingly positive view of the global growth outlook.
 

  Full Year 2019
(in euro terms)
​​​Q4 2019(in euro terms)
US +​33.1%* ​​​+10.6​%*
UK ​+24.3%* ​​​+12.8​%*
Europe +​27.8%* ​​​+10.5%*
Japan +​22.2%* ​+4.5​%*
Ireland +​33.6%* ​​​+19.8%*
China ​+17.4%* ​ +​​9.4%*

* Source: Financial Express Analytics

Following this bout of strong performance, our sense is that markets will take a breather, at least for a while and any further rises over the coming months will be muted. In fact, the positive recent performance makes us more cautious about the short to medium term outlook. While we do not believe equities should be avoided altogether, we continue to advise phasing  new investments into the markets to help dilute any short term market corrections and we also continue to encourage a focus on income as an indicator of underlying value.

Property – Several years of growth in Irish residential prices finally came to a halt in 2019 when prices on average remained relatively flat. With a strong pipeline of new property coming on stream, prices, particularly in the Dublin area will probably remain level at best. Elsewhere in the world, we still believe there is value in real estate assets, particularly as a source of income. Again, we favour diversified liquid fund structures as opposed to direct investment in physical assets.

The ​Harvest Liquid Property Strategy incorporating three international and Irish funds offering both daily liquidity and income, continues to perform well. On average, the strategy  delivered a return of around 30% year for 2019 and is currently yielding almost 5% per annum.

Gold -The price of gold rose by around 15% over the course of 2019. This was in spite of the positive equity market backdrop but reflected the degree of nervousness underlying the market rise. At this point, while global uncertainties are more prevalent, the rationale for holding gold is as strong as it has ever been and we continue to recommend a small exposure across client portfolios.

Cash – While cash should not be seen as a core long term asset, holding a position in cash over the shorter term may well be advisable. The ​Harvest Cash Alternative Strategy​, comprised of three liquid low volatility funds, has returned over 8.5% for the whole of 2019, well ahead of any cash deposit. In addition, the strategy currently distributes around 3.5% annually back to investors.

Contact Us As always, you should only consider the investment views contained in this market update in the context of your own attitude to risk and how such choices might impact your asset allocation model. Should you wish to discuss your investment portfolio, please contact your Harvest Financial Services Client Advisor or call us on 01 2375500.

This marketing material has been provided for discussion purposes only. It is not advice and does not take into account the investment needs and objectives, financial position, risk attitude, liquidity needs, capital security needs and;or capacity for loss of any particular person. It should not be relied upon to make investment decisions.

Warning: The figures refer to the past. Past performance is not a reliable indicator of future results. Warning: The return may increase or decrease as a result of currency fluctuations.

This marketing material has been provided for discussion purposes only. It is not advice and does not take into account the investment needs and objectives, financial position, risk attitude, liquidity needs, capital security needs and;or capacity for loss of any particular person. It should not be relied upon to make investment decisions.

Warning: The figures refer to the past. Past performance is not a reliable indicator of future results. Warning: The return may increase or decrease as a result of currency fluctuations.