An update on the markets from Brian Tora and our investment partners JM Finn.
A Pig of a Year?
Recently the start of the Chinese New Year was celebrated. This time around it is the year of the Pig. The Pig is the last sign of the twelve that go to make up the Chinese Zodiac. The last time we had the year of the Pig was in 2007, which marked the start of the financial crisis. The following year may have seen the collapse of Lehman Brothers and the bulk of the stock market slide, but it was in 2007 that it all started. Apparently more wars have started in the year of the Pig than in any other of the Chinese years. So what might be in store for us in this New Year?
We did get off to a good start. Markets have been recovering on both sides of the Atlantic. After dipping below 6800 at the end of January, the FTSE 100 Share Index was pushing convincingly above 7000 as the new Chinese year got underway. Indeed, after a tough end to 2018, investor confidence seems to be on the mend. And this despite the lack of any resolution over the Withdrawal Agreement that will facilitate our departure from the EU.
Of course, the health of the global economy is of more significance to the companies that go to make up our benchmark index. The key remains the strength of the Chinese economy, which clearly will no longer grow at the double digit rates it enjoyed a decade or so ago. Latest figures suggest a continuing slowdown there, although China is still growing at a rate that can only be envied by much of the developed world. Moreover, hopes that a trade deal with the US will be achieved are on the rise.
However, the downturn in demand for cars from China has exposed the fragile nature of the global car industry. Disappointing as it is, Nissan’s decision to relocate manufacture of its X-Trail SUV back to Japan can surely come as little surprise, given the recent EU/Japan trade deal and the uncertainty that has been created by the arrest of Nissan’s highly regarded boss on fraud charges.
On the plus side, a slowdown in the global economy has been largely factored into investment thinking. A recession, on the other hand, probably isn’t, but nobody is talking seriously about such an outcome. Indeed, the US seems to trundling along nicely and the Fed appears to have reversed its hawkish stance. Perhaps the year of the Pig will turn out to be calm after all.
Brian Tora, who is a respected writer and broadcaster on investment issues, is a consultant to JM Finn. Brian has enjoyed a long and distinguished career in the City. Any opinions expressed are his own and should not be construed as advice from JM Finn. A version of this article may appear elsewhere in the press.