21st January – 27th January 2019


21st January – 27th January 2019

Jordan Sriharan

Head of Collectives Research and Senior Portfolio Manager

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Front and centre of our thoughts this week include

The great and the good of the business world convene in Davos this week for their annual get-together in Switzerland. The theme for this year is the very pithy title of, “Globalisation 4.0: Shaping a New Architecture in the Age of the Fourth Industrial Revolution”. Some high-profile attendees have been forced to cancel given domestic political pressures on their home front. Donald Trump is contending with another week of the US government shutdown while Theresa May prepares for (another) week of high stakes in the soap opera that we call Brexit.

Last night saw China release economic growth figures (as measured by GDP) for the final quarter of 2018 at 6.4%, the lowest level since the financial crisis while growth figures for the full year were 6.6%, the lowest since 1991. Much of the slowdown has been attributed to the US-China trade tariff war, where both business and consumer sentiment has been damaged. The Chinese government have already embarked on a series of fiscal and monetary stimulus measures in an attempt to halt the decline.

After the big US banks kicked off the corporate earnings in the US last week, this week sees 59 companies in the S&P500 report. The net take-away from the bank’s reports was a positive one, those with large trading desks suffered in the volatile fourth quarter but that was offset by a strong period for M&A activity where fee income improved. This week sees some of the larger consumer staple companies report with Johnson & Johnson and Proctor & Gamble early in the week while we’ll be looking out for IBM, Intel and Ford too. 

This week sees two major central bank meetings with the first being the Bank of Japan who meet on Wednesday. Markets are not expecting a huge deviation from their current message where it is expected that they will maintain interest rates in line with policy. Despite a loosening of monetary policy since PM Shinzo Abe came to power, the Japanese economy remains mired in low inflation. When the European Central Bank meet the following day, it will be the first time since they officially moved away from QE. Investors believe the main problem with this policy is the fact that the European economy has been slowing down for the past few quarters. We don’t expect any changes to policy this week but do expect the debate to heat up.

Going on in the engine of Brexit

That was the week that was…..every week in UK politics feels like a monumental one at the moment. Just trying to keep up with parliament’s daily voting schedule is a hard enough task. What can we conclude from the merry-go round of last week? In a nut-shell it appears as though the country is heading towards a softer Brexit outcome, certainly currency markets have interpreted that scenario. The pound has strongly rebounded since the start of the year and almost breached 1.30 against the US dollar last week. 

We can’t help but think that there are more twists and turns ahead of us but the PM’s approach to garner cross-party support could prove more fruitful. Theresa May is presenting her new, alternative plan to Parliament today ahead of a vote on January 29th. The written media are suggesting that cross-party talks have been slow to gather momentum, consequently today’s presentation might pivot towards a deal that the DUP and pro-Brexit Tory members could favour. With 67 days until Britain leaves the European Union, we expect the pressure of time to force politicians’ hands – expect this week to be no less dramatic than the last.

In the rear view mirror of last week we saw

The current US government shutdown has lasted 31 days and is now the longest on record, with Federal employees having not been paid the entire period. With Donald Trump insisting on finding financing for the border wall (that Mexico were meant to pay for) and the Democrats in Congress refusing to endorse the plan, we may finally see how sharp his diplomatic skills are. Reports suggest the US President’s approval ratings have been hit hard by the impasse, whether there is any lasting damage will depend on ‘the art of this deal’.

Data releases last week were something of a mixed bag. Headline inflation in the UK for December (as measured by CPI) fell to its lowest level in two years as the lower oil price fed through to cheaper petrol prices. However when stripping out the volatile energy and food component, known as core inflation, it actually rose to 1.9% from 1.8% last month. Consumer sentiment data in the US (from the University of Michigan) has been negatively impacted by the government shutdown while business sentiment (Empire State Manufacturing) is also falling albeit at a slower rate than last year.  ‎

In the side view mirrors of corporate activity we notice

Last week Pacific Gas & Energy, the Californian utility company at the epicentre of the wildfires that engulfed the state last year filed for bankruptcy. By entering Chapter 11 bankruptcy protection the company will no longer be eligible for inclusion in the S&P500. The market cap of the firm has fallen from $12.3bn at the end of the year to $3.6bn making it the smallest company in the index.

Tesla has cut 3,000 jobs in a sign that the electric-car maker needs to hit production targets, in order for them to become more profitable. The company has been under intense pressure to get the business model correct with CEO Elon Musk noting that the pricing point for the Model 3 was still not affordable.

Source: Bloomberg. Figures are for the period 14th January to 18th January 2019.
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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