Welcome to the January edition of your monthly market update. Through this update we keep you in the loop on on what happened in markets last month and what it means for you (and your money).
So, what happened in the markets last month?
- December was a positive month for investors with global markets growing steadily and major stock indices reaching new all-time highs before the year wrapped
- The highly anticipated interim trade deal between the US and China was formalised mid-month, preventing the latest round of US tariffs on Chinese goods from coming into effect
- In the UK, the Conservative Party formed its largest majority since 1987. The pound (and markets) reacted positively to the news thanks to an anticipated end to political deadlock. But, the momentum was short-lived once Prime Minister Boris spoke about a hard deadline of December 2020 with - or without - an agreed trade deal between the EU and UK
- Key central banks including the Federal Reserve (US), the ECB (Europe) and the PBoC (China) released statements suggesting that their policies are likely to remain supportive of the global economy for the foreseeable future, encouraging further positive investor sentiment
And how are investments performing?
- This month's strongest performer? The Emerging Market equity holding, which grew by 4.93%. It was November’s worst performer, showing that it never pays off to make rash decisions based on short-term performance
- The worst performer? The UK Gilt holding fell by -1.76%. Positive sentiment around the growth of equities (stocks) in December meant that more conservative holdings (bonds) fell slightly. This is a natural relationship between the two asset classes and is a great reminder of why having a diversified portfolio (where assets perform differently at different times) benefits you in the long run
Lastly, what does all this mean for me and my money?
Spoiler alert: The perceived end of the UK’s political gridlock on Brexit doesn’t necessarily mean an end to uncertainty in the markets. Markets can do strange things while they’re waiting to see what happens and we should anticipate some ongoing uncertainty going into 2020.
But, smart investors mitigate those risks in two ways. Over the long-term, markets tend to have much more predictability - and tend to go up. That’s why the time you are invested in the market is so important. The other really important way to mitigate risk is to put your eggs in lots of different baskets. If you invest in all kinds of companies in different countries that do different things in different industries — not to mention investing in both stocks and bonds in a cocktail designed for you — you protect yourself from the more nauseating swings of the stock market.