The coronavirus is starting to have a big impact on world stock markets because of the fear of a global trade slowdown.
The virus outbreak doesn’t come at a good time for regions like Asia and Europe who were struggling to get their economies going anyway.
State of play – the main world stock market indexes
|Region||Index||Last Month Performance||Last 12 Months Performance|
|UK||FTSE All Share||-5.47%||1.58%|
|Europe||FTSE Europe ex UK||-4.19%||7.63%|
|Asia||FTSE Asia Pacific ex Japan||-1.20%||0.53%|
Data sourced from investing.com and up to 24/02/2020.
What’s been going on?
The coronavirus continues to have a big impact on world stock markets with many investors worried about the slowdown in world trade as a result of travel restrictions.
China and their neighbors in Asia are particularly finding things difficult with the outbreak starting and most of the cases reported there.
This doesn’t come at a good time for Japan which is close to recession, and not helped by a sales tax increase implemented at the end of last year.
The virus and the problems caused for countries like China has a knock on effect for places like Europe who do a lot of trade with China. Europe is also already close to recession.
The price of gold hit its 7 year high recently and the US dollar a near 2 year high which is a sign that investors are uncomfortable and looking to invest in assets they trust during uncertain times.
It is hoped that low interest rates and economy boosting policies will help regions like Asia and Europe.
Although the UK has had limited exposure to the virus so far its economy is not immune to a reduction in world trade.
UK interest rates were left as they were this month after many had expected them to be cut, after data showing the UK barely growing. This may have been the right decision though as inflation hit a 6 month high.
The UK is now out of the European Union (EU) and in the transition phase.
We are starting to see some of the new policies that will come into effect like a new points based immigration policy and the return of the blue passports.
The UK will shortly begin trade talks with the EU and with the deadline at the end of the year we could still face an uncertain few months before we know what the future relationship will look like.
Even though the US stock market goes from strength to strength and high after high, we are starting to see some political uncertainty as the US election draws nearer. Having survived his impeachment it is not yet clear which Democrat will be facing Mr. Trump.
A POINT TO NOTE:
90% of your investment return is driven by your asset allocation (the mix of equities, bonds, property and cash etc) not the stock or manager you pick. If you would like help making sure you are using the right mix please contact us.
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.