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Market Round Up - 20 February 2017

21 Feb 2017

Jack Turner, Research Analyst

This week's topics include Trump’s popularity ratings, UK retail sales, Japan’s trade balance and US Federal Reserve rates, as well as the usual portfolio update.

TRUMP’S POPULARITY PLUMMETS

 market-roundup-20-feb-17 

A month ago, Trump’s approval rating was just 45%,making him the first president to take office with less than majority approval. Now his ratings as polled by Gallop have fallen further – down to 40%. That’s 21% adrift from the average after a month in office and 11% lower than the previous nadir set by Bill Clinton. However, despite the mainstream news headlines, Trump is managing to hold on to Republican support with his approval ratings 4% higher than previous Republican presidents

at 83%, although that too is lower than at the inauguration. The ratings have not however stopped Trump from kick-starting his 2020 re-election campaign.

 


NEWS

UK RETAIL SALES DIP

The Office for National Statistics (ONS) announced that the retail sales volumes dropped by 0.3% month-on-month for January 2017, a figure well below the expected 0.9% rise and one that follows on from the December month-on-month decline of 1.9%. The reasons for the fall are, according to the ONS, down to higher fuel (up 16.1% in January) and food prices, which were flat versus last year’s fall. The data suggests that consumers are becoming aware of inflation, at the same time as wage growth may be tailing off.

 

JAPANESE EXPORTS REMAIN POSITIVE

Japan’s export numbers were positive for a second consecutive month with growth of 1.3%. December saw a 5.4% growth after 14 months of falling numbers. This latest data was lower than the previous month due to fewer export shipments to the US and to China which closed its factories for a week for its lunar new year celebrations and so imported fewer Japanese components. Imports, meanwhile, posted their first increase from December 2014 of 8.5% as Japan imported higher priced Saudi oil and Australian coal. Japan’s trade balance remained negative, which is positive in itself in that the world’s third largest economy could avoid criticism and threats of a trade war from the White House.

 

FED RATE RISE DEBATED 

While the Bank of England has yet to move on interest rates, the Federal Reserve (Fed) is considering an increase on its December move which took rates to 0.75%. Speaking ahead of the next US central bank policy meeting, chair Janet Yellen inferred that a rise was likely given that waiting would be “unwise”, as it would leave the Fed in the possible position of having to then quickly raise rates in a succession of meetings. The Fed may raise rates as many as three times in 2017.

 


PORTFOLIO ACTIONS

Our decision to move our tactical asset allocation to overweight versus our strategic asset allocation ‘neutral’ position for European equities on 15 December has supported investment performance. The decision was taken due to the improving macro economic data, while valuations looked attractive. Since then, the allocation to European equity is up over 7%.

 

Further to the note on the 30 January, we have now added a 1% allocation across all risk profiles to the Active Allocation Passive funds and all our Dublin-based strategies, broadening exposure beyond the Multi Manager funds. The fund is designed to have a low correlation to traditional asset classes and should perform well in extreme bull and bear market environments.


THREE ANNOUNCEMENTS DUE THIS WEEK

22 February – UK GDP Q42016 2nd Est. //   22 February – EU Rate of Inflation   //   24 February – US New Home Sales

 

Before you go

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Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales number OC378740. The value of investments may fluctuate in price or value and you may get back less than the amount originally invested. Past performance is not a guide to the future. The investments may not be suitable for everyone and if you have any doubts you should contact your investment advisor.

SOURCES: BANK OF ENGLAND, BLOOMBERG, 7IM

The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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