After some remarkable ups and downs in 2018, asset prices have come back to earth and global growth is now firmly in low gear. The US Federal Reserve’s quantitative easing (QE) withdrawal with four interest rate hikes last year made an impact across the board from widening corporate bonds to battered emerging market currencies and we expect this and the reaction to other central banks’ tightening to provide a headwind for the wider markets in Q1 of 2019.
As 2018 winds down, we are faced with the fact that Brexit and the cloudy uncertainties it poses on UK businesses and investors continues to drag on. Although it is difficult to predict what will happen given the range of outcomes and indeed the range of forecasts on the impacts of those outcomes, we at Canada Life Investments in London feel it is important to communicate a brief analysis of it as we move into 2019.
Markets took a downward turn in October as the impact of the global monetary tightening cycle, excessive valuations within some asset classes, political uncertainty and issues across emerging market currencies turned sentiment sour. However, we believe this was a sensible correction, not the first leg down in a long-term bear market.
There has been a strong revival in occupier and investor activity in the major UK regional office markets recently, reversing the trend seen since the Global Financial Crisis and confounding the current slowdown seen in regional retail markets. The question is what is driving this increased demand and how sustainable is it?