Uncertainties persist and central banks more dovish
The final month of 2018 was a turbulent one for markets, with investors looking to materially wind back risk. The result was that major equity markets suffered heavy losses, leaving many with the worst calendar year performance they had experienced
since the global financial crisis.
In the US, the 6.5% decline in the S&P500 for the 12 months to 31 December 2018 was a relatively moderate sell off, compared to the 18.3% drop in Germany’s DAX, the 16.2% fall in Europe’s Euro Stoxx50 and the 12.5% decrease in the
UK’s FTSE100 over the same period. The Australian S&P/ASX 200 was down 6.9% for the year, a relatively small fall by comparison.
December had begun well enough, with some apparent progress made between China and the United States on trade tensions as a result of meetings on the sidelines of the G20 gathering in Buenos Aires. However, this optimism quickly eroded as it became
clear that there was no agreement reached, rather it was a matter of a delay to additional planned tariff measures for 90 days to ascertain if a more broad agreement could be reached.
In the UK, Prime Minister Theresa May faced a leadership challenge over her Brexit deal. This served only to add to global tensions, as did domestic events in the US. These included what would become the longest ever government shut down, President
Trump’s publicly voiced dissatisfaction over the course of US monetary policy and a sell-off in out-of-favour technology stocks. The severity of the sell-off became so concerning that US Treasury Secretary Steven Mnuchin reportedly called
the CEOs of the six largest US banks to underpin confidence in the economy and to confirm there was ample liquidity.