|March started very much as February had finished. The world markets continued on the volatility trail. All 12 markets we track were in negative territory over March – which is something we have not seen in a long time.
Still reeling from the realisation that interest rates would probably increase sooner and by a larger amount in the US and UK, President Trump fired the first shot in a trade war, primarily aimed at China. This is never going to be seen as a good thing in the short term, and the markets responded as we would have expected.
So how does one react to times like these? There is a great quote attributed to Warren Buffet – “The stock market is a device for transferring money from the impatient to the patient.”. No one likes to see things to go down in value, this is human nature, but it only becomes a loss if you cash in. I reiterate my comment from last month. I do not worry about short term fluctuations in the markets and neither should our clients. Risk is an everyday part of what we do and is the reason why we spend so much time with new and existing clients alike talking about risk. Although we cannot remove risk completely, by diversifying our model portfolios, we can minimise risk by holding a variety of asset classes with the aim that they complement each other in times of stress.
Like February, we have seen most markets recover some ground towards the end of the month. Due to Easter and holidays I am writing this note on the afternoon of the 29th March – if anything happens in the last 2 days of the month I promise to cover it in next months note!
The first quarter of 2018 has seen many a famous name fail in spectacular fashion. As I write this letter, Bargain Booze are struggling to find financing. The firm, who are based on Crewe employ 2,500 and have a shop on every corner (or so it seems). People will have to look elsewhere for their “On my way home on a Friday night and I fancy a drink tonight” stop off. Next also reported their “toughest trading year” ever, another sign of the difficult trading environment our retailers face.
On the 4th March, the first use of Nerve Agent since World War 2 occurred in Salisbury. The former Russian double agent Sergei Skripal and his daughter were attacked, with the blame being squarely placed on Russia. The UK government took swift action and expelled 23 diplomats, which Russia reciprocated. What they didn’t seem to expect was the EU, US, Canada and NATO following suit and expelling nearly 100 “Diplomats” from their respective countries. A political coup for Mrs May, not so much for Mr Corbyn whose “Can’t we all just get along” strategy backfired massively.
Unemployment remains steady in the UK at 4.3% and inflation fell to 2.5%.
In Brexit corner this month, we find Mrs May’s political capital improve this month. After her stance against Russia was seen favourably by most of the rest of the world, the EU and the UK agreed on more details about the transition period. Today marks the last 365 days before we formally separate from the EU and the Prime Minister is talking about the Brexit dividend, the extra financial benefit of leaving the EU. No big numbers on buses today though.
Although both of the home markets we monitor were down this month, it may come as a bit of a surprise that they were the two top performers in March. The FTSE 100 was down -1.82% and the FTSE All Share was down -1.72%. Over Quarter 1 of 2018, they are down 8.36% and 7.97% respectively.
A quiet-ish month this month in Europe. Other than the ongoing Brexit talks and the Russian Diplomat expulsion little else of note was going on.
It was sad to see another example of Islamic Terrorism in France, with the Supermarket siege in the south of the country ending in 5 dead, including the perpetrator.
March saw the German DAX index down -2.05%, the French CAC down -2.51% and the Greek main market down -3.66%. Over the quarter, the same markets were down -7.56%, -3.43% and the Greek market being the one of only two markets in positive territory – up 6.97%.
March was the month that Donald and Kim agreed to go on a first date, with the plan that the two leaders who were name calling on Twitter a few months ago are now aiming to meet in May. Kim Jong-un hopped on the train to Beijing this week, a move seen by the media that he is looking for a palatable back down to the rhetoric earlier in the year.
The BBC reported that Donald Trump was “warned” not to congratulate Vladimir Putin on his election result, which he decided to ignore. A note to the president for his phone call with his Russian counterpart reportedly read – “DO NOT CONGRATULATE” but he did it anyway. This move was roundly criticised, with Senator John McCain stating “An American president does not lead the free world by congratulating dictators on winning sham elections”
Again, it seems, Mr Trump is at odds with his own administration. Where the US has been forceful in condemning the Salisbury attack and has imposed sanctions against Russians tied to 2016 election meddling and hacking, the president – in public statements and tweets – has taken a softer tone.
The two US indices we follow had similar experiences in March. The S&P500 had a modest fall of 5.33%, whereas the Dow Jones fell by 3.09% – a switch around from February. Over the quarter they were both down -6.53% and -3.52% respectively.
Far East & Pacific Basin
As China consider their response to the US’s new trade stance, the rest of the region held its breath. The two big trading powers in the world facing off against each other only means countries such as Malaysia, Indonesia and Vietnam will probably get caught in the middle.
A sporting spectacle I never miss, is the Winter Paralympics, which was held from the 9th to the 18th March. Team GB did us proud again, notching up 7 medals. Not bad for a country where snow is relatively rare and we have trouble keeping our roads clear.
The Hong Kong stock market suffered modest losses of 3.29% during March. In stark contrast, the Shanghai Index was down -6.80% in the month – the worst performing index in our pack. The ASX index in Australia also did not escape the gloom with losses of 3.71% in the month. Performance over the quarter was +0.35 (the other positive index!), -5.79% and -5.09% respectively. The Japanese main index was down 2.6% in March, down 7.05% since the start of the year.
In the rest of the world, the aftermath of recent market volatility continued. The main Indian market was down 2.94% in March, down 4.18% over the quarter. Little else to note this month, but we are keeping an eye on countries such as Brazil who have their general elections later in the year.
The best news I came across in March was that Australia is now easier to get to, with a new non-stop flight from London to Perth taking 17 hours. As someone who has endured the 27 hours flight and travelling to somewhere you don’t really want to go to first, this is excellent news! However, medical experts have warned against being cooped up in Economy class for so long as it apparently increases your chances of medical problems such as DVT. There’s always someone spoiling the good news!
As always, if you wish to discuss any issues raised in this commentary or anything else, please do not hesitate to get in touch.