May was a very exciting month, with something for everyone going on. We had Eurovision, where the most European of European countries won – Israel. A week later we had the wedding of the year with Harry and Meghan tying the knot with an estimated global audience of 1.9 billion people.

All this, however, was relegated in the excitement stakes by the introduction of the EU’s General Data Protection Regulation (GDPR). This gave everyone the chance of wiping the slate clean with marketing emails, much to the chagrin of any company you may have bought something from in the past.

It was a very busy month for President Trump too, who chose this joyous month as the best time to impose trade tariffs on imported steel and aluminium on its closest allies including Canada, the EU and Mexico. This was all done in the name of National Security, with the logic being that the US needed to produce things that are required to build tanks and fighter planes itself rather than a potential future enemy. How Canada can be seen as a threat to the US national security is beyond me, with Prime Minister Justin Trudeau being justifiably miffed and calling the tariffs “insulting and totally unacceptable”. Within 24 hours the effected countries retaliated with their own tariffs on US goods ranging from Harley Davidson motorcycles to bourbon.

Trumps second headline grabbing gambit revolved around the planned summit with North Korea which I mentioned in last months note. On the 24th May, only 2 hours after Foreign journalists reported that tunnels at the main nuclear test site had been destroyed, the President announced that he was cancelling the meeting scheduled to be held on the 12th June in Singapore due to the “tremendous anger and hostility” from North Korea. However, and please forgive the spoiler, it was announced on the 1st June that this meeting would now go ahead as planned.

Don’t worry if you find all of this very difficult to keep up with!

In the markets, May was a mixed month, with 6 indexes in positive and 6 in negative territory.


The continuing change in retail habits in the UK continued to bring bleak news. The British mainstay of the high street, Marks & Spencer, is the most recent casualty with news it is to shut 100 branches across the country whilst bolstering its online presence. The retailer reported a 62% fall in annual profits the day after – so something needs to be done, and fast.

There was more bad news for RBS as it agreed to a $4.9bn (£3.65bn) fine from the US authorities for mis-selling and BT announced plans to cut 13,000 jobs – around 12% of its workforce – in an attempt to cut costs.

But there was some good news in May. Consumer confidence rose in April, reaching its highest level since January 2017 as wages rose by 2.9% in the first quarter of the year, finally starting to pull ahead of inflation. Unemployment was also down, falling by another 46,000 in the first three months of the year and still at its lowest level since 1975.

There was also positive news in the corporate sector as the Share Centre released data showing that UK corporate profits rose to a record high in 2017 as a buoyant world economy boosted UK multinationals. The profits recorded by the survey, £153bn, were 0.2% ahead of the previous record, set in 2011.

The Bank of England stated that the UK economy had hit a “temporary soft patch”, which sounds a bit warm and cuddly. What it actually meant in reality was that it was cutting growth forecasts from 1.8% to 1.4% in recognition of the disruption caused by the bad weather in March. In the same breath they also announced that interest rates are “likely” to rise this year, although they voted to keep rates at 0.5% for the time being.

It was a relatively quiet month for Brexit, the conversation continued around the Irish border question. According to the Guardian, the EU accused the British government of “chasing a fantasy” and warned that it will not negotiate under threat. This was all prompted by the UK threatening to recover more than €1bn of contributions we have made to the Galileo navigation satellite project (like SatNav but in French) if a block on UK firms being involved isn’t lifted.

We are now ten months away from the date when the UK is supposed to leave the EU and still virtually nothing has been agreed. That agreement may be even harder to find after the Republic voted to legalise abortion, leaving Northern Ireland as the only place in the British Isles where abortion is illegal. The DUP remains fiercely opposed to any legalisation, and Theresa May remains dependent on DUP support, presumably meaning that the DUP now hold a much larger bargaining chip in any discussions on the border.

In the main UK markets, we saw a continuing good run with the FTSE100 up 2.65% and the FTSE All-share 2.60% – the 2nd and 3rd best performing indexes in our basket of markets. As has often been the case in recent years, the Pound went in the opposite direction weakening against the Dollar and Euro, trading at around $1.33 and €1.14 respectively at the end of May.


Away from Brexit, the two main stories from the continent were from Spain and Italy.

Spanish Socialist Pedro Sánchez has ousted conservative leader Mariano Rajoy in a no-confidence vote and will be the next prime minister. This is all due to the latest corruption scandal which rocked the ruling conservative People’s Party. Many Spanish voters are becoming increasing frustrated by scandals which have plagued the largest parties in Spain – with several more cases in the pipeline.

It is the first time since the Franco dictatorship and Spain’s transition to democracy in 1975 that a Spanish prime minister has lost a no-confidence vote.

Although this is fairly big news, Italy stole the limelight with its own political soap opera. As background, Italy’s economic recovery has been the opposite of most of the developed world’s strong rebound since the financial crisis. Its GDP per capita is below what it was in 1999, lagging even Greece. In response to the poor performance, Italian voters rewarded two anti-establishment parties in recent elections. While the parties come from opposite ends of the political spectrum, they were able to form a governing coalition.

Italy’s president vetoed the coalition because of concerns the proposed economic minister’s euro-sceptic view could endanger Italy’s membership in the common currency. The veto essentially collapsed the newly formed coalition and raised the risk of new elections that would become a referendum on the Euro. Rather than run the risk of new elections, the coalition opted to nominate a more acceptable, and Pro-EU, economic minister.

The resultant effect on the markets was all too clear with both the French and German markets down 0.55% and 1.54% respectively. However, it was the Athens General that had the most torrid time with the index down a whopping 9.57% over the month – albeit after some incredible growth in recent history. This was mainly driven by the announcement that EU tax inspectors are due in Athens in June to look over the books, with the hope this will lead to a long-term solution to repay the billions it owes.

We don’t follow the main Italian market as part of our monthly review, but I had a peek – it was down 4.43% at its worst, although it clawed back some of that loss by the end of the month once disaster was averted.


Other than the “will he, won’t he” conversation about Trump’s trip to Singapore to meet his North Korea opposite number and the Trade War declared against their closest allies – it was relatively quiet month in the US….

The approach Trump has deployed regarding the tariffs against elements of the developed world may seem a strange thing to do on the surface. However, it has been commented on many times that he approaches diplomacy like a businessman rather than a politician. A pattern is emerging where he takes a wild, extreme position on something which gets everyone riled, and then retreats back to a conciliatory position which is more palatable and still gets him what he really wanted in the first place.

The jobless total continued to slow, with 3.9% of the working population now out of work. Job growth and average hourly earnings reports were solid but slightly below estimates.

Although the US markets were affected by the situation in Italy, the S&P500 had a good month rising by 4.11%, the best performer in our list with the Dow Jones producing a respectable 1.68%.

Far East

On again, off again. The Trump administration love to keep people guessing, not just on the North Korea Summit, but also on trade with China. So, is the US-China trade war back on? One week elapsed between an agreement to put their differences to one side and for the US to escalate trade tensions with Beijing.

China has indicated that it is willing to buy more US agricultural exports to help balance the deficit, but that may not be enough to appease US trade hawks.

The US also wants to address the intellectual property theft that it alleges Chinese firms have benefited from, and the country’s “Made in China 2025” programme, which is a multi-billion-dollar plan to help transform its high-tech industries into world leaders by 2025.

It looked like the US wasn’t getting the right signals that they were going to get what they wanted, so they raised the ante by giving a very strong statement confronting years of unfair trading practices, amongst other issues.

The region’s market struggled to produce anything in May. The Shanghai Stock Exchange was the only positive performer at 0.18% with the Hong Kong and Japanese Markets falling by 0.44% and 1.36% respectively. Japan struggled due to figures showing that the economy had contracted by an annualised rate of 0.6%, worse than the expected contraction of 0.2%. This was the first time the Japanese economy had shrunk in two years, ending the longest stretch of economic growth since the 1980s.

Emerging Markets

It was a quiet month for Emerging Markets news and for two of the three major markets this section covers, a quiet month on the stock markets too. Both the Russian and Indian markets were unchanged in percentage terms.

There was no such calm in Brazil with the stock market falling 11% and undoing all the gains made so far in 2018.

As always, if you wish to discuss any issues raised in this commentary or anything else, please do not hesitate to get in touch.

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