This week sees the start of May, so expect the well-known financial adage of “Sell in May and go away, and come back on St. Leger's Day” to appear in some analysts’ predictions for markets over the coming months. The phenomenon reflects the fact that historically equity markets have tended to experience some seasonality with returns typically higher over the October to April period than during May to September. The proverb seems to have an added significance this year given global equities have had one of their strongest starts to the year in decades but economic data has failed to show a meaningful pick-up in activity.‎ It does feel that if equities are to edge higher from this point, we will need to see an improvement in both macroeconomic and corporate fundamentals going forward.

A holiday-shortened week for most of Europe with the Easter break impacting market schedules. Wall Street was open yesterday but average trading volumes were significantly lower than normal. Despite the back-to-school feel for many this morning the release of economic data this week is quite sparse, indeed the corporate earnings calendar is likely to be a key driver of market sentiment. Central bank meetings may grab a few headlines however the return to government for many of the world’s leaders will set the media agenda for the week which we begin with below.

For most people it seems Game of Thrones returning is the highlight of this week, however for a non-watcher I will be focusing my attention instead on the economic data released that could shape where markets move next. Considering the strength of equity markets this year (albeit following a severe fourth-quarter sell-off last year) alongside weakening economic data, we are surely going to have to see data start to improve significantly to lead markets higher. Having said that, a strong corporate earnings season will go some way to help equities march even higher – the earliest signs are positive, which are discussed below in the corporate section.

There's plenty to get excited about this week as another Brexit deadline looms. Central bankers will be in focus with the European Central Bank (ECB) holding a monetary policy meeting and the US Federal Reserve (Fed) releasing minutes from their March FOMC meeting. China also releases a number of important economic indicators and first quarter US corporate earnings season also gets underway.

It is likely to be another week dominated by Brexit headlines. However, Brexit aside, the highlight will be Central Bank meetings with both the US Federal Reserve (Fed) and the Bank of England (BoE) holding monetary policy meetings this week.

It is likely to be another week dominated by Brexit headlines. However, Brexit aside, the highlight will be Central Bank meetings with both the US Federal Reserve (Fed) and the Bank of England (BoE) holding monetary policy meetings this week.

Kicking off with politics in the US – Donald Trump is due to present his 2020 budget on Monday where he is expected to spark another battle with the Democrats by asking Congress to provide $8.6 billion for his border wall. Of more importance to us, however, is the economic data that is to be released this week.

The focus of the market’s attention this week is likely to be the European Central Bank (ECB) meeting this Thursday. No change in monetary policy is expected but we will get a chance to see an update of the staff forecasts. These are likely to downgrade economic growth in the Eurozone. In December their growth forecasts were for 1.7% in 2019/20 and 1.5% in 2021, in contrast to the European Commission’s growth forecasts which are lower, at 1.3% and 1.6% in 2019 and 2020 respectively. We wouldn’t be surprised if the ECB moved closer in line with the Commission’s estimates by the end of this week. The overall tone in the post-meeting press conference is likely to be cautious, it is clear that economic conditions have been deteriorating more recently however the ECB still have negative deposit rates in place which limits their ability to stimulate the economy.

It will be the usual culprits of US-China trade negotiations and Brexit that will dominate headlines and investor sentiment this week. Politics aside, it’s also a busy week on the macroeconomic front with the highlight set to be the release of manufacturing PMI confidence readings from across the globe and US economic growth (as measured by GDP) figures for the fourth quarter of 2018.

Considering the theme for economic data has been one of recurring disappointment, plenty of our attention will be on the first look at February PMIs for Europe and the US, providing the latest insight into the health of their manufacturing and service sectors. The Eurozone is of particular concern with their Composite PMI falling nearer to contractionary territory (i.e. below 50).

Please get in touch if you have any questions, our team would be happy to help.

The value of your investment can go down as well as up, and you can get back less than you originally invested. Past performance or any yields quoted should not be considered reliable indicators of future returns. Prevailing tax rates and relief are dependent on individual circumstances and are subject to change.

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