1st October – 7th October 2018


Front and centre of our thoughts this week include

It’s a busy week as we enter the final quarter of the year, with the release of the global manufacturing and service sector sentiment surveys, the US employment report and the Conservative Party Conference set to occupy domestic investors’ attentions.

Over the weekend, the business sentiment surveys for China were released and they were a mixed bag. Optimism grew within the service sector but the manufacturing sector saw a drop in confidence. It is too early to know for sure whether the drop in confidence has been caused by recently imposed US trade tariffs. Nevertheless, the readings will do little to ease fears over a slowing in economic activity within the country. The US equivalent surveys will be released later this week and investors will be keeping a close eye to see if the elevated levels of business confidence can be sustained.

In the UK, a string of better than expected data has seen investors take a more positive view on the economy, with the Football World Cup and the unusually warm summer providing a boost. The release of the manufacturing sentiment surveys this morning suggest this positive trend is likely to be sustained with the confidence reading exceeding expectations. To sustain conviction on the performance of the UK economy, investors will be hoping for a similarly positive reading from the service sector survey on Wednesday, given the service sector accounts for 80 per cent of the UK's economy.

The other key data release this week is the US labour market report on Friday. The US economy continues to add jobs at a fairly steady rate and last month’s report showed wages growing at the fastest rate in nine years. There is currently a disconnect between investors and the US Federal Reserve’s (Fed’s) views on the number of interest rate rises between now and the end of 2019. Investors currently expect three more rate rises compared to the Fed’s expectation of four. However, with higher oil prices and trade tariffs already exerting upward pressure on inflation, if wage growth continues to trend higher then it may be enough to convince more investors that the Fed’s projections for interest rate rises will be realised.

Going on in the engine of Brexit

The Conservative Party Conference in Birmingham takes centre stage this week and it is set to be a nervy affair for Prime Minister, Theresa May. Her closing speech on Wednesday is set to be the highlight of the week.

Talk of a leadership contest has been relatively quiet of late as Brexiteers have lacked the numbers to oust the Prime Minister. However, with the Conservative Party lacking clear direction on Brexit and suffering from permanent infighting, her tenure as leader looks likely to be brought into question this week.

Over the last couple of weeks, the pressure has certainty been ramped up on Mrs May. The EU rejected her Chequers Plan in Salzburg, Boris Johnson rallied the Brexiteers within her party with his “Super Canada” trade proposal and the Labour Party have agreed to vote against almost all trade deals she negotiates with Brussels. Any hope she had of agreeing a fudged or blind Brexit deal and postponing hard choices to a later date appear to have been blown apart. Investors will therefore be keeping a close eye on her speech on Wednesday for any signs that she will shift negotiations away from her Chequers proposal. The message so far has been defiant - with Mrs May stressing the Chequers deal remains the best plan for the country.

In any case, whatever plans for negotiations with Brussels are agreed at the conference, with no parliamentary majority for any potential Brexit deal, the probability of a no-deal continues to creep higher.

In the rear view mirror of last week we saw

As widely expected, the US Federal Reserve (Fed) raised interest rates by 0.25% at their monetary policy meeting. This was the third rise in interest rates this year and the eighth increase since 2015. Policymakers also had a relatively positive outlook for the economy, with forecasts for economic growth revised higher for this year and next. More importantly, another interest rate hike this year looks a near certainty, with the “dot plot” showing 75% of Fed officials expect to raise interest rates again in December.

After much debate, Italy’s populist government proposed their budget for 2019. The budget had a more expansionary stance than markets had anticipated and is likely to put Italy on a collision course with the EU. The coalition, Five Star and the League government agreed a budget deficit of 2.4% for 2019 with the same deficit target set for the 2020 and 2021 budget. The announcement was much higher than finance minister, Giovanni Tria had originally proposed, but does allow the government to fulfil some of their election promises including basic income and tax cuts. The budget still needs to be submitted and approved by the European Commission by October 15th and in its current format is unlikely to be compliant with European debt rules as it does not reduce Italy’s debt burden over the medium-term. After the budget announcement, sentiment towards Italian assets materially worsened with both equity and bond markets coming under pressure.

Sticking with politics there was another victory for US President Trump with the news that he is one step closer to fulfilling one of his signature campaign promises of re-negotiating NAFTA. The US reached a deal with Canada over the weekend, and a new deal, the US-Mexico-Canada agreement, or USMCA, is expected to be signed by Congress by the end of November.

In the side view mirrors of corporate activity we notice

Tesla boss, Elon Musk found himself in hot water last week. His tweet stating “funding secured” to take Tesla private saw the Securities and Exchange Commission (SEC) file a fraud lawsuit against him. To settle the dispute, the SEC fined Musk and Tesla $20m each and forced Musk to step down as Chairman of the company for three years.

21st Century Fox agreed to sell its remaining 39% share of Sky to Comcast last week. The announcement was made only four days after 21st Century Fox were outbid by Comcast in an auction for a 61% stake in Sky.

Source: Bloomberg. Figures are for the period 24th September to 28th September 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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