Investment markets - A review of 2019
Global equities produced healthy gains in 2019. US equities performed well, rebounding from a turbulent end to 2018. US market confidence improved over the year as the expected interest rate rises from the US Federal Reserve did not take place and rates were reduced. The worldwide impacts of the trade dispute between US and China eased as a ‘phase one’ trade deal with China brought a sharp rally in equity markets across the globe during December.
UK equities underperformed global markets during 2019 as uncertainty over Brexit negotiations overshadowed the market for much of the year. However, a victory for the Conservatives in the December general election led to a year-end rally, while sterling also gained ground against other major currencies over the fourth quarter. Despite signs of slowing economic growth and manufacturing activity earlier in the year, European equities improved towards the end of 2019 following interest rate cuts from the European Central Bank and the positive progress on the US/China trade dispute.
Returns from bond markets were relatively modest during 2019. Aside from May and August when a marked rise in financial market volatility triggered demand for ‘safe-haven’ assets, government bonds underperformed equities. Although many major central banks have loosened monetary policy, underpinning bond markets, investors have preferred higher yielding alternatives to major government bonds. In the UK, inflationary pressures have remained subdued and index-linked gilts marginally underperformed conventional securities as a result.
In the UK commercial property sector, good industrial and office sector performance offset weakness in the retail sector. The latter seeing a decline in capital values on the high street and in shopping centres. In the industrial and office sectors, capital growth and total returns have been positive over the last 12 months. Overall, the investment market continues to attract capital from yield-driven international investors, particularly Asian investors focusing on London.