January 2019 - Fed’s Tone Soothes Investor Worries - Systematic Fund Manager's Comments

14 February 2019

Thomas de Saint-Seine

2019 began on a similar footing to 2018, albeit slightly less enthusiastically, as global equity markets roaring to life. The level of positivity surprised many, given the number of unresolved issues currently faced by investors across both the political and economic spectrum.

From a political perspective, January saw the longest ever (partial) Government shutdown in U.S. History. However, this event failed to deter domestic markets, which staged an impressive rebound after a horrific December, with the S&P500 gaining 7.8%, and the Nasdaq up 9.1%. Meanwhile in Europe, the UK’s PM Theresa May was unable to deliver on her Brexit plan. Emerging market equities posted their best monthly return in nearly three years (up 8.8%) as the Fed’s dovish stance helped to boost sentiment. The EMEA region (especially Russia and Turkey) lead the pack with impressive gains. China also gained from the momentum built around the trade talks, Chinese officials visit to Washington, while also benefitting from a weakened U.S. dollar.

 Chart of the Month:

"Global investors are hoping that the U.S. dollar will ease on a less aggressive monetary tightening path. This should relieve some of the pressure on emerging markets that typically pay higher prices on imports from the U.S. when the dollar is strong”.

EM & U.S. Dollar: An Inverse Relationship

Three-year period to 31 January 2019. Source: Bloomberg & RAM Active Investments


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