• Overall gains for most developed countries although May saw sharp falls due to a breakdown in US-China trade negotiations. Tensions then began to ease in June as the two nations agreed to restart discussions.
  • Central banks in the US and Europe appear to have changed course with possible rate cuts ahead. The ECB has also hinted at further easing of monetary policy if inflation does not improve.
  • Brexit continues to dominate headlines regarding the UK market with this quarter seeing the resignation of Theresa May and an extension to Article 50 meaning that the deadline for Brexit has now been pushed back to October.
  • Japan has struggled with its exposure to trade with the US and China along with the ascension of a new emperor which was celebrated with a 10-day market holiday.
  • Emerging markets generally lagged developed markets with South Africa, Indonesia, and Argentina among the better performers.


This quarter saw the US made stock market gains overall although May marked a rough spot mid quarter, in part due to as flare up in trade tensions. Comments from Trump suggested imports could be imposed on Mexican imports as an effort to encourage the Mexican government to stem the flow of migrants crossing the US-Mexico border from Central America. However, in June we saw these proposed tariffs indefinitely suspended following negotiations between the two nations. Elsewhere, trade talks with China also featured heavily this quarter – negotiations collapsed in May with both sides increasing tariffs and the US blacklisting Chinese tech giant Huawei. This left equities significantly weaker with the US suffering moderate losses. June however saw talks resume giving hope to progress towards resolution between the two countries. Following this de-escalation in global trade fears we saw the S&P 500 hit new highs towards the end of the quarter with strong performance from the Financial, Materials and Technology sectors. The Healthcare sector continued to struggle against headwinds from a backdrop of political discussions as the US presidential campaign season begins. It is through that the price and availability of healthcare will be a major focus for candidates over the coming 18 months.

Economic data for the region has been mixed with GDP up 3.1% and employment data remaining stable (unemployment data is currently at a 49 year low of 3.6%). However, data has shown consumer and business confidence has declined with business activity slowing. At its June meeting, the Fed didn’t announce any changes although many believe there may be a rate cut in the next quarter. The US yield curve continues to be inverted – this is where the yield for long term US treasury bonds is lower than that for short term yields. In the past this has previously preceded several recessions, albeit after significantly longer periods of inversion.

Moving forwards we expect the main driving factors for the region to be the US presidential campaign, global trade talks and the Fed’s views on the US economy and interest rates.


The main headwind in the UK this past quarter has remained the Brexit debacle. Over the past few months we saw the Article 50 deadline extended and Theresa May’s resignation as leader of the Conservative Party. At the time of writing we have seen the shortlist for the next leader of the party and, by extension, Prime Minister, whittled down to two candidates – Jeremy Hunt and Boris Johnson. Neither of the candidates agree of their plans to tackle the UK’s exit of the European Union, which now has a deadline of 31st October. Although the extension to Article 50 was a relief to many, the turmoil within the UK Government has only added to the Brexit spectacle. The effect of the original March deadline has also become more apparent as stockpiling ahead of the expected Brexit may have led to an inflated GDP figure earlier this year. This quarter we saw the figure drop with widespread weakness across the manufacturing sector with auto companies suffering heavy losses. This is reflected in the fact that the manufacturing PMI contracted for the first time in 7 years. Overall UK shares didn’t fare too badly considering the country’s political trouble with domestically focused sectors struggling most. Strong performers for the region included the Technology sector and many large consumer goods companies. In addition to this the UK labour market remains strong with unemployment at a multi-decade low.


European equities showed overall gains this quarter despite struggling in May. Technology continued to perform strongly along with consumer discretionary services and industrials. Auto companies continued to meander as trade talks threaten tariffs and German manufacturers recover in the wake of new emissions testing rules. GDP statistics for the first quarter were released showing quarter-on-quarter growth of 0.4% with annual inflation for June holding steady at 1.2%. If this inflation outlook does not improve then the ECB may have to increase it’s use of quantitative easing and other similar strategies, deepening their dovish stance on markets. Political factors continued to be a dominant factor in the region with spring elections for the European Parliament, general elections in Spain and further concerns over the Italian economy.

Asia and emerging markets:

The uncertainty surrounding the US-China trade war continues to weigh heavily on Asian and emerging markets along with the emergence of disappointing economic data from several constituent countries in the region.

May saw another escalation in trade war tensions after a breakdown in communications between China and the US with the latter raising tariffs on $200 bn of Chinese imports and putting one of China’s largest tech companies, Huawei, on a trade blacklist. Both countries agreed to resume negotiations at the annual G20 meeting in Osaka which should see an ease in tension between the two nations this coming quarter. As part of this, the US will postpone imposing additional tariffs on $300 bn of Chinese imports while China is to commit to addressing the trade imbalance by purchasing more food and agriculture goods from the US. Although it should be noted that this factor was not mentioned in statements from the Chinese authorities. Trade has not been the only issue for China as they try to ward off advancements in the recent economic slowdown with hopes of further stimulus in the coming months.

This quarter fallout from the fluctuations in trade tensions weighed heavily on Japan who has been vulnerable with China and the US making up the top two countries for both Japanese imports and exports. The first quarter also saw the Japanese Government announce an unprecedented 10-day market holiday to celebrate the ascension of the new Emperor Naruhito.

Elsewhere, South Africa, Indonesia, Thailand, Singapore and Argentina did well whereas Korea joined China in negative territory on the announcement of poor corporate earnings.