Market commentary – Q3 2019


  • Political factors remain a major factor in global markets with US trade tariffs, Hong Kong protests and Brexit being defining events affecting markets this past quarter.
  • Progress was seen in US-China trade talks with previously planned October tariffs on China postponed by the US following constructive discussions on trade focusing on technology and agriculture.
  • The run up to the 2020 US presidential election has put a spotlight on the US healthcare system with the sector continuing to struggle as a result.
  • Sectors that saw good returns this quarter have been defensive stock (utilities, consumer staples and REITs), Taiwanese technology (driven by semi-conductors), UK quality growth stocks and Japanese equities.
  • Weak economic data signalled the continuation of a possible global slowdown with lacklustre results from US, Europe, Japan and China.
  • Emerging markets have struggled against a strong dollar and disruptions in oil supply following drone attacks in the Middle East.
  • The Fed announced rate cutes in July and September. September also sat the European Central Bank reintroduce quantitative easing after previously halting the scheme in December 2018 with interest rates falling further into negative figures.
  • Brexit uncertainty continues as Boris Johnson attempts to ratify a deal and avoid a no deal exit before the 31st


  • The US-China trade war remained the greatest influence for US markets this quarter. Previously announced tariffs on China were applied in September but further tariffs planned for October were postponed after positive talks between the nations covering technology and agriculture.
  • Hope for a resolution has varied wildly taking the market with it as prices swung either way depending on sentiment and investor outlook however, overall the region saw modest gains over the past quarter.
  • Concerns over economic growth peaked in August with lacklustre economic data and the US yield curve remaining inverted. In response, the Fed took an accommodative stance and cut interest rates in an attempt to offset concerns over recent market concerns.
  • Traditionally defensive areas performed best this quarter including utilities, real estate and consumer staples. On the other hand, the healthcare sector has continued to struggle against headwinds generated from heated debates over the US healthcare system ahead of next year’s presidential elections. Energy companies also faced a difficult quarter after terror attacks in the Middle East disrupted the oil market.
  • Moving forwards, we expect politics to be a major influence on US markets, especially as talks with China and election campaigns continue into next year.


  • Economic data out of Europe remained lacklustre this quarter.
  • In September the European Central Bank (ECB) started to take measures to boost the economy with a return to quantitative easing announced after previously ending it in December 2018. This has led to interest rates falling a further 0.10% into negative territory.
  • There have been concerns about future rate cuts could have an adverse effect and depress economic activity through reduced lending. However, European banks have recently seen the highest pace of monthly lending since the 2008 crisis so this may not be an immediate issue.
  • Mario Draghi’s successor has also been announced with Christine Lagarde (Head of the International Monetary Fund) set to become President of the ECB at the end of Draghi’s term on 31st
  • Economic weakness in the region has largely been driven by continued headwinds in the manufacturing sector with Germany’s automobile production still recovering form new EU emissions testing rules. The auto industry has also found itself a casualty in the crossfire between the US and China regarding trade.
  • Politically, Italy and Britain continued to be the clearest risks facing investors. Italy has seen the formation of a new coalition following the departure of the right-wing populist Lega party. This new coalition has eased tensions over the Italian budget debacle with a less confrontational approach expected although Italian bond yields have declined significantly as a result.
  • Brexit remains another of the major political factors in Europe albeit with a much more uncertain forecast as the 31st October deadline looms without a ratified deal (at the time of writing.

Asia and Emerging Markets:

  • Asian and Emerging Markets generally fell this quarter as US-China trade tensions escalated with the fallout coinciding with continuing fears over a global growth slowdown.
  • China struggled for a second consecutive quarter with an increase in tariffs, allegations of currency manipulation and an apparent continuation in an economic slowdown with the manufacturing sector hit hardest.
  • Hong Kong also struggled as political protests and civil unrest attracted international attention deterring tourists and investors alike.
  • Elsewhere in Asia, Japanese stocks rallied in September partly driven by bilateral trade negotiations with the US which helped offset some of the damage from the ongoing Japan-South Korea trade dispute. Overall though Japan’s economy remained weak by the end of the sector with exports seeing their ninths consecutive monthly decline.
  • Taiwan was one of the strongest of the Asian and Emerging Markets with an excellent performance for the technology sector and semi-conductors in particular.
  • Conversely, the weakest performer has been Argentina who suffered a major sell-off following a surprise primary election wherein the opposition candidate emerged the victor. Following the shock result, stocks plummeted up to 45% and the Argentine Peso fell 26%
  • Other markets that faced a tough quarter were generally those sensitive to a strong US Dollar and oil prices which have recently risen.
  • We expect trade tensions and global slowdown fears to remain the driving risk factors moving forwards with US trade talks and Central bank policies to be major driving forces in market sentiment in the months to come.


  • Despite Brexit headlines, UK stocks gave a stronger than expected performance over the past quarter with quality growth and defensive stocks seeing the highest gains.
  • In contrast to this, some economically-sensitive areas saw poor performance with Financials and Commodities hard hit – unfortunately both heavily feature in the FTSE 100 which lagged other UK indices.
  • In company news, this quarter saw the collapse of travel giant Thomas Cook after failed rescue talks and the London Stock Exchange received a bid from rival Hong Kong Exchanges although this was ultimately rejected.
  • Politics has continued to dominate headlines with Boris Johnson’s prorogation of Parliament ruled unlawful by the Supreme Court and the continuing Brexit deadlock although measures have been taken under the Benn Act to circumvent a no deal Brexit.
  • At the time of writing, we are still uncertain as to how, when or even if Brexit will occur or the effect it will have on the market.