The final quarter of 2019 began with an easing in geopolitical tensions, resulting in risk assets outperforming traditional safe havens. This came as the US and Chinese authorities moved closer to agreeing a partial trade compromise, with a “Phase One Trade Deal”, although, overall, trade tensions still remain elevated.
The three months saw strong equity market returns in local currencies, although the strength of Sterling, advancing +7.9% against the USD, +4.8% against the EUR and +8.4% against the Yen, reduced those returns for GBP investors. In the face of this headwind, gains were still made, with the MSCI All Country World making +1.9%, led by emerging markets (+5.1%) and the FTSE 100 (+3.3%).
In Sterling terms the S&P 500 reached new all-time highs (+26% overall in 2019 and +334% over the decade) returning a further +1.9% over the quarter, while Europe ex UK (+1.7% and +22% in 2019) and Japan (+1% and +16% in 2019) fared well too.
Despite many commentators pronouncing US equities ‘expensive’ throughout the year, earnings nevertheless rose marginally in the face of a global slowdown, though the price-earnings ratio has risen, making US equities ‘more expensive’ than they were. Overall global equity valuations are higher than average, but still remain reasonable at 16x forward earnings with non-US developed market equities trading at lower multiples than US equities and emerging market equities valued lower still.
To view the full commentary from Sandaire’s Chief Investment Officer, StJohn Gardner, please click below to read more on the impact of a global growth slowdown, implications of the trade war, Brexit and Sandaire’s outlook and positioning for 2020.
Investment Office Final Quarter Update 2019