If the first 10 months of the year is anything to go by, then the final straight of 2018 is expected to keep investors edgy as the trajectory of global assets seems as uncertain as they have been in recent years.
The month of October mirrored events which characterised 2018 as a whole, especially for credit markets. US High Yield markets declined by 1.61; European High Yield markets declined by 1 per cent; Global Emerging Markets declined by 0.60; and, as a result in a marked increase in risk aversion, interest rates European Sovereign bonds declined marginally during the month of October, with the total return on Malta Government Stocks, as registered by the CC Malta Government Bond Index being a positive 0.30 per cent.
Credit spreads keep widening on thin volumes. The US dollar has fallen below the 1.14 level against the euro. Investment Grade Corporates in EUR and USD have been out of favour for quite some time now while the moves registered in equities, particularly since mid-October, have left investor gasping for some air. In all fairness, the last couple of trading sessions of the month did offer some respite but it did little to tame investor’s wariness.
The world’s leading economies, the US and the eurozone, do appear to be in good shape albeit some weak numbers have begun to cripple in. But it is Emerging Markets, the impact the strong US dollar has had on these economies this year, and the ramifications the trade wars are having on EM’s largest economy, China, which seems to be causing most of the jitters.
Credit investors have been relatively patient for most of the year in the hope of some form of good news, or market positivity to turn around investor sentiment but now they seemingly feel that time is running. 2018 has been extremely challenging, and the next 2 months are not expected to be any different. If markets continue to correct or if they rise from this point forth, the next question, or rather challenge would be how best to position portfolios for 2019.
With the lingering uncertainty caused by external factors in what could be described to be a healthy global economy (the US is moving from strength to strength, the eurozone is timidly improving whilst EM economies remain robust), markets have become extremely fluid. Trade wars, Brexit talk, uncertainty emanating from Italy and Argentina continue to linger on. These are only a few of the ever ending list of issues which grapple the markets today and are expected to shape the remainder of 2019.
Disclaimer:
This article was issued by Mark Vella, investment manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.