Market update – December 2019

A summary of our current economic and market views.


Charities Team

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Stocks edge higher amid trade talk optimism

Global equity markets continue to rise as confidence in a US-China trade deal grows. US stocks lead the way, pushing further into record territory, while other major markets are at or slightly below peaks.

With investors in a more optimistic mood, bonds have surrendered some of the year’s gains, but remain in strong demand. Progress in trade talks has been accompanied by signs of improving global growth. In the US, capital goods spending increased at the fastest pace since January. And in Europe, German manufacturing is showing early signs of recovery. These indicators support our view that the global economy is stabilising as we head into 2020.

Central banks remain supportive

Though the Fed has indicated it will leave rates on hold for now, the minutes of its latest meeting and a recent speech by Chairman Jay Powell suggest it is not moving away from its accommodative stance. This is a key factor behind continued bond market strength.

In the UK, markets were surprised when two members of the Bank of England’s Monetary Policy Committee voted for an interest rate cut in November. This suggests the UK central bank may be more inclined than previously thought to cut rates, especially if the upcoming election results in continued political uncertainty.

Conservatives pulling ahead in UK polls

The latest UK polling data suggests the Conservatives have extended their lead over the opposition Labour party. This has supported domestically-exposed UK stocks, as many investors believe a Conservative victory will result in greater clarity over the course of Brexit. UK stocks have also been supported by high levels of M&A, as we explore here. However, current UK activity is weak, with November survey data suggesting that both the services and manufacturing sectors are struggling.

Portfolio positioning

We have not made significant adjustments to our portfolio over the past month. Our equity exposure has continued to perform well. Our weighting remains in line with our long-term target allocations. Though bonds have retreated slightly from their recent highs, we still consider them expensive and maintain an underweight position. By contrast, we continue to like alternatives as a means of increasing diversification within portfolios. We also continue to hold a slightly overweight position in cash, which allows us to quickly take advantage of any opportunities that may arise.


Charities Team

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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James Brennan

James Brennan

Portfolio Director