17th December – 23rd December 2018


17th December – 23rd December 2018

Jordan Sriharan

Head of Collectives Research and Senior Portfolio Manager

Email Jordan


Front and centre of our thoughts this week include

As we reach the end of the year it is becoming increasingly likely that the much fabled ‘Santa Rally’ may not be joining financial markets this festive season. Risk sentiment amongst investors has taken a nose dive while the global political elite continue to find ways to unnerve their electorate. Unsurprisingly this backdrop has led to a particularly weak period for asset prices, both equities and bonds, with investors now questioning whether 2019 will be a profitable one. 

The eyes of the market will be focused on the final monetary policy meeting of the year over at the US Federal Reserve. For the last three months the probability of an interest rate rise on Wednesday was equivalent to what Americans would term ‘a slam dunk’. Fast forward through a period of high volatility, geopolitical posturing and weaker economic data, and those odds have fallen. It is highly likely that the Fed will raise interest rates by a quarter of a percentage point this week but that is, arguably, of less interest.

Investors will be looking at the latest economic projections from the Fed and deciphering whether the US central bank has turned negative given the recent, less than positive, news flow. Of particular interest will be the “dot-plot projections” which are the collection of the FOMC’s forecast for interest rate rises over the next three years. Markets had been pricing in three (quarter of a percentage point) rate rises in 2019 but this has now fallen to less than one. We expect some bond price volatility for US Treasuries as we head into the middle of the week.

The next day in the UK we’ll hear from the Bank of England who will be announcing the outcome of their final monetary policy meeting of the year. The BoE last raised rates in August to the current base rate of 0.75% and we expect the BoE to remain at this level of until there is more clarity around the final Brexit withdrawal deal. Naturally trying to achieve visibility around that point is difficult, making the role of economic policymaker all the more difficult.

Expect some news during the week from the European Commission on how they propose to deal with Italy and the current issues around their draft budget which are in breach of the EU’s fiscal rules. It looks like being a busy end to the year for Commission President Jean-Claude Juncker. By the end of the week we will also see the release of the final estimate of third quarter GDP for the US which we expect to remain at 3.5%.

Going on in the engine of Brexit

After a very busy start to Brexit related news last week, news flow died down as confusion appeared as the leading story. As we reported in our mid-week piece following the cancelled vote on Tuesday, the UK government is navigating uncharted waters here and having a clear view on how events transpire from here is almost impossible.

Prime Minister Theresa May made her way over to Brussels last week in an attempt to rewrite the wording around the Northern Ireland backstop after she feared defeat by a ‘significant margin’ at the House of Commons vote. Her approach was defiant, best illustrated by a heated discussion with Jean-Claude Juncker where she accused him of calling her ‘nebulous’. Again, how matters progress from here with Europe is anyone’s guess.

The PM did survive a vote of no confidence in Parliament, late on Wednesday evening, thus providing a more stable platform from which she can negotiate with Europe. Whether European leaders believe the UK can continue to negotiate in this haphazard way remains another topic of debate.

In the rear view mirror of last week we saw

Hard to believe that anything of economic significance occurred last week amongst all the Brexit-driven news.  In the UK, unemployment figures released showed a job market that was in strong health. The report highlighted increases in full-time employment, record low redundancies and high vacancies all contributed to wage growth of 3.3% in the three months between August and October.

Despite the strength in UK consumer incomes, the story from UK business is a more different one. Last week saw both manufacturing and industrial production numbers weaken again, a trend that has been in place since the start of the year. In Europe the picture also remains mixed, the German manufacturing PMI data has drifted materially weaker and last week’s number was a continuation of this theme.

Finally last week’s European Central Bank meeting, as expected, revealed that QE in the Euro area would come to an end. After nearly four years of both government and corporate bond buying by the ECB, purchases will end this month. Whilst interest rates are not expected to rise until late next year (the base rate in Europe remains at zero) Chairman Mario Draghi steps down next summer which may lead to some uncertainty.

In the side view mirrors of corporate activity we notice

This morning ASOS have cut their sales growth guidance for next year after a weak November that has worried investors in advance of the holiday season. Shares in the company fell as much as 43% in the aftermath with the news dragging down the share prices of other internet and high street stores. Whilst the likes of Debenhams and M&S have suffered with falling sales for some time, the online retailers with their lower cost base had been pitched as the future platform for consumer sales. Today’s news suggests that the UK consumer is starting to reign back spending, interestingly at a time when wages are growing.

Source: Bloomberg. Figures are for the period 10th December to 14th December 2018.
Where the index is in a foreign currency, we have provided the local currency return.


The above chart provides the performance for the three developed market geographies where the TMWM MPS portfolios maintain their largest exposure. All investments and indexes can go down as well as up. Past performance is not a reliable indicator of future performance.

Opinions, interpretations and conclusions expressed in this document represent our judgement as of this date and are subject to change. Furthermore, the content is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or a solicitation to buy or sell any securities or to adopt any investment strategy. This note has been issued by Thomas Miller Wealth Management Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Register Number 594155). It is a company registered in England, number 08284862.


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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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