April - June 2019

April - June 2019
 
Market Summary of Q1
Moving Forward – Preview of 2nd QTR
US
Europe
Asia Pacific 
The Secondary Market 
 
Market Summary of Q1
The end of 2018 was fairly weak but the equity markets rebounded in Q1 as the US-China trade dispute diluted slightly, central banks were accommodating while Government and corporate bonds moved steadily higher.
US equities ended higher, assisted by the Fed taking a dovish tilt, with tangible progress in the US-China trade talks and the government shutdown ending. 
Eurozone equities finish the quarter strongly and recovered well, again supported by their central banks moving away from tightening monetary policy. However, economic growth concerns still linger.
UK equities also performed well through Q1 regardless of Brexit uncertainties and kept very much in-line with global benchmarks. 
Japan had advances in areas but were not as robust as their developed counterparts. 
Emerging Markets were also strong led by China. With more optimism regarding trade talks and a possible agreement there seemed light at the end of the tunnel, coupled with further support for the domestic economy.
Bond markets fell with the 10-year Treasury yields falling to their lowest point since the end of 2017. The 3-month Treasury bill yield traded upwards of the 10-year bond in March, highlighting a sign of caution from investors regarding economic growth.

Moving Forward – Preview of 2nd QTR
 
USA
It’s all About the Trade War
We see a steady increase in US equities for this upcoming quarter and expect a good performance from the S&P 500.  With the Fed continuing its dovishness, indications are there could be a breakthrough in trade talks between the US & China, although nothing is set in stone.
We expect economic data to be somewhat mixed as there are many variables on the table that could go either way, though we are expecting GDP to rise somewhere in the region of 3% over this period. 
Unemployment is a strong area in the US at the moment and we see this continuing its improvement and could reach levels not seen in decades if 3.5% or 3.6% could be achieved and we are looking to reach hourly earnings climbing to around 3.2%. 
Business and consumer indices may weaken as the cloud of rate cuts from the Fed looms large in its June meetings. 
We feel Cyclical areas in the market will perform well such as IT, materials and financials.  Healthcare doesn’t hold such optimism from us as legislation regarding pricing faces potential changes, with more defensive area of the market could make some gains, though beware energy stocks. 
Conclusion: If the trade war dissipates then this could be a great quarter, however, if there is a change of heart it could easily go the other way.

Eurozone
We have a similar outlook for equities in the Eurozone with advancements expected in the IT sector and industrials. We expect volatility in the car manufacturing sector and semiconductors if trade tension lingers on, again if there is a lack of escalation in these then the markets waters will be calm and growth steady. We have a decision pending from the German Government in the real estate sector regarding a potential freeze on residential property rents of up to 5 years, which could have a negative effect on the overall European market for fears other governments may follow suit.  
Eurozone growth for Q1 was 0.4% Q-on-Q.  Inflation could be a major issue in Q2, monetary policy could come into play, potentially an easing may be needed if the inflation outlook does not improve. 
Spain will be holding election at the end of April.  Italy will also be being closely looked at regarding their fiscal position by the EC to gauge if they are exceeding the budget deficit previously agreed. 

Conclusion: IT companies are a good short-term buy, but again trade tensions can have a ripple effect, but most sectors should hold relatively firm, no need for panic.

The UK

We expect good performance from UK equities in this quarter, with the UK being of special interest to us this year.  Equities that offer defensible earnings growth could well keep extending their run of outperformance that has been ongoing since the start of the year. 
Technology is looking strong and also the large consumer goods companies, especially if their perception is dependable growth.
With Brexit potentially become no clearer during the next 3 months where Article 50 comes into consideration we may be looking at domestic focused sectors underperforming. 
The March 31st deadline will likely have a negative impact, certainly on manufacturing.  There is a probability of the economy shrinking due to a decrease in production in vehicles for example. 
Manufacturing is in a precarious position due to the March 31st departure no-go.  We predict the data at the end of Q2 not tobe good reading for the sector as a whole and we predict that we will actually see contraction not expansion, this would be a first since July 2016.
Conclusion:  There is plenty to be comfortable with in the UK but Brexit is an egg-shell that everyone is stepping on currently, manufacturing is to be avoided bit overall equities look strong.

Asia Pacific
Japan’s equities will underperform from the marginal gains they made in Q1.  We see negative growth on the horizon for a number of reasons. The Yen will likely strengthen against major currencies, due to it’s safe-haven status amongst investors, especially with rate cuts becoming more of a reality rather than a rumor in the US.
If trade issues with the US and China continue it will have a detrimental impact on Japan.  Higher levels of tariffs would result in serious repercussions on global supply chains especially Japan. With the campaign against Huawei continuing Japanese electrnic component suppliers will get hit hard, the ripple effect will result in a slowdown in corporate earnings growth, already seen in Q4 last year.
Bilateral trade talks between Japan and the US are due but those talks are dependent on the situation with China and may take a back seat with elections due.
Sentiment on the economy was Q1 would be decline but we await figures that may be better than expected, if so, it would result in Japan avoiding a technical recession.  We will be looking for the Bank of Japan to ease on monetary policy to help keep things stable for the quarter. 
Most of Japan’s listed companies will hold annual general meeting during the course of June, although sometimes tedious affairs but with a corporate governance at the forefront of the business world in Japan and enhanced shareholder activism, results could well be fascinating.
The rest of Asia will be fairly stagnant and may even post losses with a mixed bag whereby we expect poorer performance than their global equivalents. 

The rest of Asia certainly won’t get away from the trade tensions between the US & China if it escalates or even if it lingers on. However, we see the smaller ASEAN nations as outperforming their larger neighbors during this quarter such as the Philippines, Thailand and Singapore as advancements in communication services and consumer staples stocks are a go-to. Indonesia has an upcoming election which will go a long way towards how they perform over the coming months.

Hong Kong may see gains if the contentious extradition bill get suspended.  Taiwan is one to watch in the region this quarter and we expect to see a rise in their industrials and consumer staples, but there may be some declines alongside from the healthcare sector.

China is precarious for investors right now with trade tensions it could be a quarter that see’s losses due to stagnating trade talks and then rallies of the back of promise and stimulus measures and in South Korea we expect 

Conclusion: The Rest of Asia is definitely the best value for equity buyers in Q2 due to the larger markets being tied up heavily in the Trade dispute between the US & China, if it gets resolved we will see a reversal of fortunes, but we believe this could last longer than this quarter.

The Secondary Market

The beauty of the secondary market is that when a corporation, fund, trust or bank own large amounts of stock spread over various investment vehicles, there comes the time to want to cash in on profit but also the necessity due to certain statutes of limitation to have to cash in on profit or loss.  Using the open market runs the risk of adversely affecting the market price if large amounts of stock are traded, especially if the selling entity owns more of the particular stock spread over different investment vehicles.
This is where Global Business Brokers come in and facilitate.

We also have many private clients that at some stage need liquidity from certain individual positions and have various reasons for using Global Business Brokers and not dealing with high street brokerages, we are able to facilitate this by offering positions to our equity buyers and also to new prospective clients.

For further information check it on Wikipedia: https://en.wikipedia.org/wiki/Secondary_market
The secondary market is thriving and as our client base grows so does Global Business Brokers reputation for being a reliable source to buy and sell quickly.
Our model revolves around the fact that we are able to buy ‘Publicly traded stock in a private capacity.’
 

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