The door has not quite closed on 2019, just yet. Alongside moving office, growing the team and hosting more than a handful of events, the markets around us have been constantly moving and not a day goes by where we don't reflect on how far things have come.
But what happened in 2019? Why is the American stock exchange at a record high? Can it continue? We thought it would be worth looking back at the year that has seen two British Prime Ministers fail to leave the European Union and an American President the subject of an Impeachment hearing.
The world stock markets had an inauspicious end to 2018 with a correction just before Christmas which meant that 2019 started from a lower than expected base. Whilst there are always concerns on the horizon, global growth was still looking positive for the coming year and a number of positive factors were still positively impacting corporate profitability. This optimistic outlook took a dip in May as the baby was thrown out with the bathwater by President Trump imposing tariffs on US/China trade and the Chinese quickly retaliating in what became an economic squabble between the world’s new superpowers. This rivalry has certainly limited world growth in 2019 even as there are hopes that common sense will eventually prevail, and trade talks can find common ground. With President Trump looking to boast about his economic credentials before the next election, should he make it that far, and the Chinese looking to stimulate a wilting domestic economy, common sense should be to put national pride aside and find a compromise. The trouble with common sense, however, is that it is not that common and cannot be found in ample quantities on either side of the Pacific Ocean at present.
With the world switching (very slowly) to alternative energy sources it is interesting to note a decoupling of the oil price to supply. Given some of the challenges oil exporters have faced over the last 12 months, it is surprising that oil has generally traded within quite a focussed range. Perhaps this is a window into the future with the US being energy independent and increased generation/storage of energy across the developed world allowing OPEC less command over economic growth than we have experienced in recent history.
World stock markets have managed to grow throughout the year despite the turbulence in politics and trade. Partly this reflects the market’s ability to look beyond the short-term crisis in leadership and partly, and indeed mainly, it is because of global central banks continued fiscal stimulus. Interest rate cuts from the Federal Reserve and continued quantitative easing from the European Central Bank have allowed for the continued increase in asset values around the globe. Can it continue? It is likely that central banks will continue the stimulus as long as necessary though it leaves them little room for manoeuvre when the next correction comes. With some good luck and less inflammatory tweets we may see a resumption of US/Chinese trade which would smooth markets and should allow global growth to recover.
Other events we noted and thought were worth mentioning in 2019 include:
January – Qatar withdraws from OPEC.
February – US announces withdrawal from intermediate-range nuclear forces treaty with Russia
March – All Boeing 737 Max 8 grounded following Ethiopian Airlines crash
April – Notre Dame Cathedral fire
May – US imposes tariffs on $200Bn of Chinese goods
June – Hong Kong protests begin
July – Boris Johnston becomes UK Prime Minister
August – Amazon rainforest fire
September – Saudi Refinery attack
October – Turkey launches offensive in North Eastern Syria
November – US formally begins withdrawal from Paris Agreement on Climate change
What a year it has been right? With the elections now done, we are keen to see what lies ahead for Brexit and what the response will bring for the next election.
Over and out for 2019!