Media Centre

18th January 2017
Market Commentary January 2017

market comm Jan 17

Many years ago, the American writer and humourist, Mark Twain, said of October ‘This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February’. I think this neatly sums up 2016 due to the sheer number of implausible possibilities that became reality and the starkly different markets we faced in most months of the year. Here is a short summary of 2016 that is not too heavily focused on the B word or the T word.

In China, weak economic data and the slowest GDP growth rate since 1990 causes the Shanghai stock market to fall sharply.
Crude oil falls below $30 for the first time since 2003.

Oil continues to plummet, suffering an 11% fall in two days and hitting $27.
The People’s Bank of China cuts the reserve requirement in order to stimulate loan growth in the economy.

The European Central Bank cuts interest rates and boosts quantitative easing in an attempt to kick-start growth within the Euro area.
The Federal Reserve in the US decides not to raise interest rates and guides to fewer increases in the future due to economic uncertainty.

Saudi Arabia lays out its ‘Vision 2030’, a plan to diversify away from oil, including selling a stake in the multi-trillion dollar national oil company.
Apple’s iPhone sales drop for the first time in the history of the company.

Donald Trump gains the Republican nomination for President.

The UK market surges as polls show a majority of voters favouring to stay in the European Union.
The UK market and sterling plummet as voters choose to leave the European Union.
David Cameron steps down as Prime Minister after 6 years in office.

Following the sharp decline in sterling, British chip design darling, ARM Holdings is acquired by a Japanese firm in a $32bn deal.

The Bank of England cuts interest rates from 0.50% to 0.25%, Quantitative Easing is resumed and growth forecasts are lowered.
UK markets continue to surge due to weak sterling.

OPEC members agree to cut production, oil rallies along with stock markets.

A relatively quiet month on the global stage, much needed respite after a tough 2016.

Respite is over. Donald Trump is elected President of the United States of America, winning the Electoral College vote but losing the popular vote. Stocks rise, bonds fall, forecasters despair.
US consumer confidence rises to the highest level since 2007.

US unemployment falls to a nine year low of 4.6%. The Federal Reserve raises interest rates by 0.25% to 0.75%. The solitary rate rise of the year, compared to four rises that were expected.

After the unexpected 2016 that we saw, one wonders whether 2017 can possibly have that much surprise in store for us. Along with the aforementioned Twain quote that reminds me of 2016, there is one more that I find my mind wandering to. As the economist John Galbraith once said ‘There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know’.