Simon Hawker IFA St Albans - Market Review Quarter 1 2017

Wednesday 12 April, 2017

Simon Hawker, Lonsdale Services Managing Director and Independent Financial Adviser St Albans reviews world equity markets for quarter 1 2017.

UK equities (the FTSE All-Share Index) returned 4% in sterling terms for Q1 2017, outperforming the Gilts (All stocks) index return of 1.6%. The larger companies in the FTSE 100 Index had their fourth consecutive positive quarter, returning 3.7%, and the mid, FTSE 250 Index returned 5.4%.

On the 29th of March the UK government formally triggered Article 50, and notified the EU Council of their intent to leave the European Union. The EU and UK have two years to negotiate a separation 'divorce' deal, and agree their future relationship. However, triggering Article 50 had limited impact on the performance of the UK and European equity markets as it was already expected.

For more information about how your financial planning will be affected by Brexit read Simon Hawker, independent financial adviser, St Albans - how triggering Article 50 affects financial planning.

The FTSE Europe (ex UK Index) returned 7.5% in sterling terms during Q1 2017. UK investors benefited as the euro continued to weaken against all major currencies, caused largely because of lower than expected German inflation which decreased from 2.5 to 1.5% in the quarter. Also comments from the ECB confirmed the Eurozone still needs a high degree of monetary stimulus going forward to support economic growth. The results of the Dutch election also supported European equity markets. However, the results of the French election in May could have a bigger impact on the performance of European equity markets.

In the United States the FTSE USA Index returned 5% for Q1 2017 in sterling terms, taking the 12 month sterling return to 35.2%. The USA's economic output was stronger than expected in Q1 2017. The revised GDP figure was 2.1%p.a for the last quarter of 2016, better than the previously expected 1.9%p.a. The market also reacted positively as initial jobless claims in the US labour market deteriorated less than was expected. However Trump's recent defeat on overturning Obamacare affected the markets negatively.

Global equities were generally strong in the first quarter of 2017 as global economic data improved. Overall the FTSE World ex UK index performed strongly up 5.8% in Q1 2017 in sterling terms, outperforming the UK equity market. 

Japan was one of the worst performing major equity markets in sterling terms returning 3.6% in Q1 2017, as the yen appreciated over the quarter.

The FTSE Asia Ex Japan Index produced positive returns in Q1 2017 helped by the rally in global stock markets. Positive economic news in China contributed, and investor optimism in Hong Kong supported equity markets. 

The MSCI Emerging Markets Index posted a strong gain in Q1 2017 given improved economic growth prospects, and no action by Trump on protectionist trade policy.

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