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This week we have presented content from our Monthly Investment Newsletter. Click HERE to read the entirety of our Winter Quarter update.
Overall, the three months from April to June represented another good period for investors in risky assets. Although, as per usual, a critique of the global environment over the period doesn’t provide an obvious explanation of why that should be the case. Some of the largest issues facing markets remained as unresolved at the end of the quarter as they had been at the start. In that category were –
• what sort of Brexit deal (if any) the UK government will end up securing;
• the outlook for global interest rates and inflation;
• if there is ever going to be an end to the US/ China trade war; and
• if there is an end to the trade war, what will be left standing when the smoke clears?
This should only remind us that the reason markets, in aggregate, go up is often unrelated to these sorts of issues. It’s usually not about politics, the direction of interest rates, economic growth rates, or even conflict. Yes, those elements (and others) can each influence investor behaviour and, to that end, they can have some short-term impact on whether prices are being bid higher or lower.
However, the more common reason markets go up is that global commerce continues to function, even when times are uncertain. Regardless of what Donald Trump tweets, McDonald's continues to sell Big Macs. Regardless of whether or not the UK remains in the European Union or the trade war ends, we will continue to put petrol in our cars and pay for our phones, food, entertainment and clothing.
Of course, the actions of central bankers, politicians and regulators can all have an impact on whether we feel more or less confident about what lies ahead. That can be very important, as it can influence what (and how much) people are prepared to spend their money on. If the future looks much less certain, we might decide to cut back on luxuries and save a little bit more. Perhaps we carpool. Perhaps we have a staycation rather than a vacation.
But overall, unless uncertainty and fears are so high that we significantly change our collective consumer behaviour, most of us will generally continue to live our lives tomorrow in much the same way as we do today. And the businesses and service providers that we utilise in our day to day lives will continue to benefit.
To read the rest of our Q2 Investment Summary click HERE.