2017 drawing to a close

As we look forward to the Christmas holidays and the new year ahead, we also tend to look back at what the year past brought us. In particular, in our profession, we look back at how the year actually unfolded relative to the expectations and forecasts we published a year ago. Surprisingly positive is likely to be the reaction of holders of globally diversified capital market investments, like the various portfolio types we manage for UK savers and investors at Tatton. As our generic asset class returns table above shows, up to the end of November, stock market investors enjoyed another year of very reasonable returns. Only low risk fixed interest bond investments and commodity investors not a not-quite-as-stellar year; yields simply couldn’t fall any lower to provide yet another boost to bond values. December has not changed the picture materially for the year, with markets trading more sideways than decisively up or down.

Busy week for Central Bankers

With central banks only recently switching their messaging from monetary expansion to gradual monetary tightening focus was on the world’s central banks this week, as they were all scheduled to make announcements. First up, US Federal Reserve chair Janet Yellen announced another 0.25% – widely expected – interest rate rise on Wednesday. Only hours later, the People’s Bank of China (PBoC) followed by upping interest rates in both its short term open market operations and its medium-term lending. Next up was the European Central Bank (ECB), who on Thursday broke the trend by keeping interest rates and QE operations on hold, despite revising upwards their growth and inflation forecasts. Finally, the Bank of England likewise kept interest rates on hold in a unanimous decision from its rate-setting committee, and confirmed that it anticipates only “further modest increases” over the next few years.

Japan: the turnaround story

Last week we discussed our rising optimism for Japan’s economic prospects, but we didn’t touch on our outlook for Japanese asset prices specifically. Well, we essentially believe that Japanese stocks are not only under-owned by global investors but they also look ‘cheap’ relative to other developed equity markets.

M&A: Mickey and Amazon

We recently wrote about impending changes to the retail landscape, and how e-commerce has fundamentally changed retail economics and how companies like Amazon, Netflix and Google are beginning to become a dominant force in the supply metrics for end-user demand. This changing economic landscape, and the threat posed by Amazon and others to more established brands and companies, is now evident in recent M&A activity. Maybe the “traditionalists” are starting to fight back?


Please click here for the full Tatton commentary.