Latest investment update

Neither the US election nor the UK Autumn Budget disrupted the world economy or stock market performance.

It’s been a busy few weeks for markets. The US election, UK Autumn Budget and interest rate cuts on both sides of the Atlantic have given investors a lot to take in.

But none of it caused any meaningful market uncertainty.

In fact, following an uneventful October, stock markets responded positively to the US election. The Republican Party’s dominance in the results sparked excitement around possible pro-business policies.

UK markets also stayed in good shape following the Autumn Budget, and UK-based businesses are performing in line with an improving growth outlook for the country.

Bonds, on the other hand, did see some big moves.

Global government bond yields experienced their largest rise in months in October, with prices falling. Solid economic conditions and more subdued expectations around interest rate cuts were key factors behind this.

Lilian Chovin, Head of Asset Allocation at Coutts, the bank behind our customers’ investments, said the world economy remained positive for investors overall, and conditions could improve further.

“The new American government’s proposed tax cuts, China’s recent stimulus package and signs of an improving UK economy could all prove positive for investing,” he said.

But he added: “We’re mindful that the proposed increased tariffs from President Trump could hurt businesses outside the US, particularly in areas that rely heavily on exports such as the emerging markets and Europe. This is something we’ll keep a close eye on.”

The team at Coutts continues to prefer stocks to bonds in light of the positive economy. They adopt a global approach toward stock markets, with a focus on the US.

They recently increased their investment in UK stocks. This was to reflect the country’s improving economic backdrop, with inflation now below the Bank of England’s 2% target and wages rising.  

And while they prefer stocks, they continue to hold well-diversified funds and portfolios. Their investments include US government bonds, for example, to potentially provide some ballast should stocks drop. 

We’ve recently seen company earnings season for the third quarter of the year, during which businesses announce their financial performance.

Most companies had reported their results by the end of October and, according to Bloomberg, 75% of them beat published forecasts. Banks were the stars of the season, where stronger than expected results triggered a positive post-results reaction in markets.

Howard Sparks, Senior Equity Specialist at Coutts, said: “The broader macroeconomic landscape has remained stable and previous concerns of a US recession have abated. This, along with falling inflation and expectations of lower interest rates, appears to have fuelled this solid company earnings season.” 

Find out more:

·         US election result – what it means for your investments

·         Autumn Budget – what could it mean for your finances?

·         How will a drop in interest rates affect your finances?

Here you’ll find our previous investment market updates.