On Friday, the FTSE 100 notched up its 12th consecutive record high and marked the 14th consecutive day of the index finishing higher.
UK GROWTH TO SLOW
The National Institute for Economic and Social Research states that it expects the UK economy to expand by 0.5% in Q4 2016 and 2.0% for the whole of 2016. However, the institute warned that 2017 may see the growth rate halve given the role of consumer spending in the economy and since the boost will face headwinds from inflation and the other consequences from the depreciation of Sterling.
A ROW OF RECORD HIGHS
On Friday, the FTSE 100 notched up its 12th consecutive record high and marked the 14th consecutive day of the index finishing higher. The previous record of an eight day run had stood since May 1997 and in its 33-year history, while the index had only enjoyed a similar run of good fortune on two other occasions: in 2004 and 2009. The rally is being attributed to the recent lows in Sterling that means that profits from the high overseas earnings of the index constituents are worth more, and a view that UK companies operating in the US will benefit from Trump’s spending plans.
TRADE EXPORTS UP, BUT BALANCE BIGGER
The Office for National Statistics (ONS) published data on 11 January suggesting that the fall in value in Sterling is now helping exporters. November’s figures are an increase in the volume of goods exported of 1.1% for the three-month rate, up from the previous three-month figure of a 2.7% decline. However, the figures were not enough to improve the overall UK trade position. A £3.3bn surge in imports meant the deficit on trade in goods and services was estimated to stand at £4.2bn for the month of November, up from £2.6bn for October.
US RETAIL SALE RISE
Retail sales in the US increased 0.6% month-over-month in December 2016 according to the Commerce Department, on the back of higher wage packets and more confidence. The increase also followed an upwards revision of 0.2% to November’s number, but below the 0.7% consensus expectations. Sales of cars and gasoline rebounded 2.4% and 2% respectively. In the three months to December, retail sales went up 1.6% and, for the full year, sales rose 3.3%, 1% higher than in 2015. It’s not just the consumers flush with confidence – their levels hit their highest level for nearly a decade – it’s also small businesses who have closed the confidence gap between themselves and the big businesses.
7IM’s decision to hold on to our gold position has benefited portfolios. The commodity, which 7IM owns through two physically-backed exchange traded funds, has risen 4.5% since the start of the year. It also went up following the market’s disappointment in Trump’s press conference on Thursday - his first for six months.
The conference itself saw Trump lead with much of the same rhetoric that drove his election campaign. However, it left markets with a reason to pause given the event was light on the details of the proposed tax cuts and infrastructure spending that had driven the last two months’ stockmarket rally. Instead the soon-to-be-President slated US intelligence and news agencies. The Dow Jones Industrial Average ended 0.3% lower and the S&P 500 0.2% lower.
THREE ANNOUNCEMENTS DUE THIS WEEK
17 January – UK Inflation Rate // 18 January – UK Unemployment Rate // 18 January – US Inflation Rate
Before you go
We hope you’ve enjoyed reading this article. Use the Get in touch box below to sign up for future investment updates. These take the form of regular market and investment updates and our 7IM webinar series.
SOURCES: *ESTIMATES, REUTERS, BLOOMBERG; 7IM