Global Markets Newsletter – December 2019
2019 was a relative good year for the US economy and for the markets. Recession fears diminished especially in the dawn of the election year 2020. Liquidity remains strong and the FED is at hand like the New York Fed which injected $25billion during the last week. Interest rates remain stable at 1.75% and manufacturing looks positive growing with a pace of 1.1%. Inflation is at the same levels at 2.3% and retail sales marginally dropped to 0.2% with the hope of turning postitive due to Christmas holidays. Markets continued the upward trend which became stronger and consequently corrections are more likely. Dow Jones, S&P 500 and Nasdaq reached record levels.
In Europe Brexit continues especially after the winning elections for Borris Johnson. In Germany and France although inflation remains stable on a yearly basis (1.1% and 1% respectively), on a monthly basis it is negative at -0.8% and -0.1% respectively showing clearly issues for growth. The Central bank (ECB) lends commercial banks at a negatice rate (-0.50%) in order to put pressure on them to lend households and companies so as to circulate money and to stimulate demand. In Greece, bonds had a slight correction with their yields reaching italian ones (10y yields at 1.44%, Italian at 1.41%).
The EUR/USD moved more towards 1.12 mainly due to the elections in Britain assuring that Brexit will continue. Fears for recession in the US triggered also sales to dollar and purchases in euro. This correction may be temporary but as 2020 is an election year for the US this may trigger higher volatility.
Our preference remains the american equities versus european stocks where we hold no position. Governemnt bonds have marginal returns and corporate bonds bear higher risk for their potential return. US equities hold 80% of the total portfolio which the technological sector holding 60%. Cash remains crucial as corrections are buying opportunities often.
US Consumer Spending (Source: Bloomberg)
Euro-Area Inflation (Source: Bloomberg)
EUR/USD (Source: Bloomberg)
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