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Markets Weekly

10 May 2019

Week ahead

May continues to be an eventful month for markets as US President Donald Trump raises trade tensions with China.

Investors should monitor Chinese data for any signs of improvement which could lift investor sentiment following Trump’s threat to increase tariffs on Chinese imports.

Global economic health

Next week we will look carefully at April’s industrial production and retail sales numbers to gauge the strength of the Chinese economy following seasonal softness that weighed on the purchasing managers’ index.

In the US, investors were pleased to see better than expected Q1 gross domestic product (GDP) growth. However, keep an eye on April’s industrial production and retail sales data to assess the health of the US economy further.

With Q1 GDP growth in the eurozone surprising to the upside, we await Q1 German GDP growth, April inflation data and March industrial production numbers for more signs of a better macroeconomic picture in the region.

Chart of the week

Buying high?

As sensational as they may sound, all-time highs for the S&P 500 Index come along quite frequently. In addition to the three we’ve had so far this year, more than 1,100 were recorded over the past 70 years. Put differently 6% of all trading days in this period were record-breaking day.

After all, unlike currencies for example, stocks are not a mean-reverting asset. They should continue to appreciate as long as earnings are growing which should be the case as long as wealth is being created around the world.

This is the main reason why we believe that staying invested in equity markets is the key to long-term performance. Of course, short-term traders may be keen to “wait for a pullback” and portfolios may need fine-tuning along the way. But for long-term investors, timing isn’t as crucial as acting, even at an all-time high.

 

Chart of the week

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Investors can win the trade war

Is the recent sell-off inspired by rising trade tensions between the US and China a time to enter the market?

Previous editions of Markets Weekly

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