Moola July 2019 Market Commentary

Posted by Simon Moore on July 31


The selection of Boris Johnson as Prime Minister and his formation of a new cabinet, sets the stage for further twists and turns in the Brexit process. Of course, we don’t know the details of any final outcome but nonetheless, Moola portfolios own thousands of companies listed outside of the U.K. and swings in the pound are managed through some currency hedging. As such, Moola portfolios are expected to be less affected by the specifics of Brexit’s ups and downs when compared to those holding only U.K. listed shares.


Growth concerns

Elsewhere key central banks in Europe and the U.S. are increasingly concerned with the outlook for economic growth, especially in the manufacturing sectors of the global economy. The good news is that due to this concern, the central banks are looking to cut interest rates and potentially take other measures too. These actions can provide a boost to the economy and potentially raise bond and even share prices, all else equal. It remains to be seen how negative forecasts for the economy will play out over the coming months as further data comes in. For now, global growth remains generally positive, though below the levels most policy-makers would like to see.


China slowing

Chinese growth slowed to 6.2% in the second quarter of 2019, impacted by increasing trade restrictions with the US. While this growth rate would be the envy of many countries, including the UK, it is a potential problem for China where it represents a slowing of growth relative to recent history and expectations. It remains to be seen if the trading relationship between the US and China can be improved by ongoing negotiations. This is important as China has been an important source of growth to the global economy over the past decade.

So with Brexit, potentially slowing growth and US/China trade tensions, there are various potential headwinds for investors today. Still, the first half of the year has been positive for investors with many global stock markets seeing double-digit gains for the year so far. We see this reflecting an improvement from the pessimism of late 2018 and also the market’s increasing assessment that central banks may step in to provide further support for growth should the data warrant it.

Written by Simon Moore

Simon is responsible for investing and related content at Moola. He was previously CIO of FutureAdvisor, a US digital advisor. His most recent book Digital Wealth, explains automated investing. He studied economics at Oxford, and completed his MBA at the Kellogg School of Management.

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