This week we provide three more updates on news out of the UK, US and the Eurozone influencing financial markets, and summarise some recent changes made to our Multi-Manager funds.
The Halifax published their latest house price growth numbers, with 2017 finishing with house prices higher by 2.7%, lower than the growth in 2016 of 6.5% and much lower than the 10.1% growth in 2015. The numbers were in line with the Nationwide survey which put house price growth in 2017 at 2.6%. The Halifax also stated that they expect house process to continue to grow in 2018, but that the growth would be in line or lower than that of 2017.
UK productivity jumped to 0.9% in Q3 2017, the largest rise in six years as fewer people working shorter hours created the same output. Fewer people entering the workplace also supported the increase. However, productivity growth over the past decade continues to be the worst since the 1820s and the level of output is still well below the pre-financial crisis trend rate for the UK of about 2% a year. The low numbers are one of the main reasons for the sharp downgrade in economic growth unveiled by the Chancellor in his 2017 Autumn Budget. It has also been a key factor in keeping down wages across the economy.
Eurostat’s estimate for December’s inflation number for the core region was published on 5 January as coming in at 1.4%, down from 1.5% in November 2017. Looking at the main components of the Eurozone’s inflation, energy is expected to have the highest annual rate in December (3.0%, compared with 4.7% in November), followed by food, alcohol & tobacco (2.1%, compared with 2.2% in November), services (1.2%, stable compared with November) and non-energy industrial goods (0.5%, compared with 0.4% in November).
The US economy added 148,000 jobs in December, a number that was lower than the 190,000 expected as an unexpected loss of 20,000 retail positions during the holiday season held back the headline number. However, data for November was revised up from 228,000 to 252,000. After the revisions, job gains for non farm payrolls averaged 204,000 in Q4 2017, leaving the country with two million more jobs over the whole of 2017 versus 2016, and helped the unemployment rate to remain steady at 4.1%, the lowest it has been since 2001.
The 7IM Multi-Manager funds saw their allocation to active asset managers increase over the course of 2017, with the Balanced profile (as an example) now nudging 60% of its holdings invested with third party fund managers aiming to beat rather than track the benchmark. At the end of 2016, that number was less than 50%. The increases led to changes to our manager line-up and, as a result of divesting in FTSE 100 futures, we have instead invested in more UK mid cap stocks. This is in line with the latest tactical asset allocation decision to reinvest given the value these represent over their large cap peers. The team invested in Artemis’s UK Select and the Polar Capital UK Value Opportunities funds across all fund profiles, while investments for Moderately Cautious and Balanced fund holders were also made in the Columbia Threadneedle’s UK Extended Alpha fund.
THREE ANNOUNCEMENTS DUE THIS WEEK
09 Jan –Eurozone Unemployment Rate (Nov) // 10 Jan –UK Balance of Trade (Nov) // 12 Jan –US Inflation Rate (Dec)
SOURCES: BLOOMBERG; HALIFAX, REUTERS; 7IM.
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