OCM Commentaries

Market Commentary 23rd January 2020

By January 31, 2020 No Comments

UK Economy Shows Signs of Resilience

Following a flurry of disappointing data releases and dovish comments from members of the MPC last week, sentiment regarding the outlook for the UK economy had deteriorated somewhat, fuelling speculation of an imminent rate cut from the BOE to help stimulate the economy.  This week however, the economy is beginning to show signs of recovery, with a pick-up in sentiment after recent data shows a robust labour market. Britain’s jobs report showed the unemployment rate holding steady at a 45-year low, and wage growth coming in slightly above expectations, supporting our expectations for a post-election pickup in growth.  More positivity came from the Confederation of British Industry’s business report, after data showed optimism among manufacturers was the strongest in nearly six years.  The market figures ended a run of weak economic data and weakened the case for a rate cut at the end of the month.

For further information on the UK economic data influencing markets this week, and our outlook on the UK economy, please see the attached Market Update document.

World Economic Forum in Davos

The rich and powerful are in Davos, Switzerland this week for the World Economic Forum’s 50th annual meeting, and the gathering is being closely watched to see how some 3,000 business leaders, international political leaders, economists, celebrities and journalists discuss global issues and aim to improve the state of the world.

President Donald Trump boasted about his domestic achievements in his speech at the World Economic Forum on Tuesday, claiming credit for overseeing an economy in its longest expansion yet, with an unemployment rate at a five-decade low after tax-cuts, deregulation and improved trade deals.  However, just as the world trade outlook was beginning to brighten, tensions between the US and Europe escalated as the two look set for a renewed clash over everything from car tariffs to digital taxes. Last week, Trump threatened punitive action against EU members if they aren’t willing to compromise on a trade deal before the US elections in November; and although tensions appeared to de-escalate on Wednesday, with France and the US agreeing a temporary truce, concerns were revived once again on Thursday when Secretary Wilbur Ross said at the World Economic Forum that the US was still considering levies on European auto imports.

Meanwhile, in the most high-profile remarks on the country’s economic policy since the deal was signed last week, Chinese Vice Premier Han Zheng told the World Economic Forum that the country’s agreement with the US won’t hurt rival exporting nations, emphasising that its commitment to buy more from the US is in line with its World Trade Organisation obligations.  The comments come after rising complaints from nations that were left out of the agreement and are now concerned that the phase one trade deal will only help divert trade, rather than expand international commerce.


Coronavirus Sparks Market Nerves

The outbreak of a Coronavirus in Wuhan, China this week sparked panic across the world, with reports that the deadly and easily transmittable virus likened to the SARS epidemic 17 years ago was spreading in the region.  There are fears that the coronavirus may spread more widely during the week-long lunar new year holidays, which start on 24 January, when millions of Chinese travel home to celebrate. At the moment, it appears that people in poor health are at greatest risk, as is always the case with flu.  Public Health England have rated the current risk to the UK as “Low”.

Fears that China’s latest coronavirus could disrupt travel and commerce, and slow economic growth sent a chill through global risk markets, hitting Asian stocks hard, depressing copper and oil prices, and sending investors into safe havens like US Treasuries.  Stocks had reversed these losses, but sold off again Tuesday afternoon, after reports that the virus was discovered in a man in the US who had travelled from China.  Although the news may provide markets with extra volatility in the short term, we expect any impact to be short lived, with no changes to the overall global economic outlook and market expectations over the year.

Our Positioning

As it stands, with data continuing to support our expectations for a gradual improvement in the economic fundamentals, we remain cautiously optimistic, and are currently in wait-and-see mode for more evidence that the global economic outlook is brightening. We continue to look for opportunities as part of our staged re-entry into specific areas of equity markets, and we are poised to act when they arise.


Key Events We Are Watching This Week:

  • Friday: UK, EU and US Manufacturing and Services PMI data for Jan.
  • Monday: German Ifo Business Climate data for Jan.

For anyone who wants further data to substantiate the position please review the attached Global Economic Update document and the Economic Dataset also attached.

Model Portfolios & Indices

Global equity markets remained mixed over the week, with trade optimism being partially offset by risk-off sentiment owing to concerns over the coronavirus outbreak in China, while the UK index declined after a strengthening in the pound. The OBI portfolios remain defensively positioned in comparison to normal market conditions, and we continue to closely monitor the data, looking for opportunities as they arise. The portfolios gained over the week owing to strong performance of our small/mid cap assets, with changes made in recent weeks expected to continue to provide further support to portfolio performance going forward.

Please note that the YTD data in the table below reflects performance from the start of the new year.


Important Information


The data above will not directly correlate to the indices as there is always a delay in pricing because the US markets close significantly later than the European markets and the Asian markets. The data set above reflects the last close and much of the day’s movements will not yet be reflected in the portfolios due to pricing delays. You cannot therefore directly correlate indices to the portfolios. The value of investments may fluctuate in price or value and you may get back less than the amount originally invested.


Past performance is not a guarantee of future performance. Performance figures quoted include the fund manager charges but exclude other fees such as adviser, custodian, switch and/or discretionary investment management fees. Unless otherwise instructed and accrued, income is reinvested into the portfolio.


This Day in History


On this day in 1978, Sweden became the first nation in the world to ban aerosol sprays, believed to be damaging to the earth’s ozone layer. This fact is especially relevant this week as world leaders debate what should now be done to address climate change concerns at the Davos World Economic Forum in Switzerland.



Have a great week,


Jason & Gina