WEEKEND WEB: Shares reach new heights

Money Matters, by Scott Woods
Money Matters, by Scott Woods
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MONEY MATTERS: By SCott Woods, financial advisor at Bingham-Woods Independent Financial Advisors, 2 Bridge Street, Spalding. Tel 01775 718257.

Company shares (equities) continue to scale fresh heights. US equities reached all-time highs, lifted by Republican Party plans to cut taxes, and also by a benign economic backdrop of good GDP growth, low unemployment, low inflation and low interest rates.

The S&P 500 index is up 25 per cent since President Donald Trump was elected last year.

Emerging markets have gained even more. Hong Kong and Japanese equities are at two-year highs.

Risks, of course, remain, especially around North Korea, and the possibility that a new chair of the US Federal Reserve could be appointed in January who might raise interest rates more quickly than dovish incumbent Janet Yellen.

Spanish company shares and government bonds underperformed their euro-area counterparts after a reported two million Catalans voted to break away from Spain in a referendum.

Investor disquiet over the ensuing political crisis grew as Catalonia’s president Carles Puigdemont pledged to push ahead with a formal declaration of independence in the coming days. Spain’s IBEX 35 stock market index dropped three per cent on Wednesday, while its bond yields lurched higher for a third day (yields move inversely to prices). Still, market tensions eased somewhat after Puigdemont called for external help in brokering a deal with the Spanish government.

Chinese investors have celebrated their annual Mid-Autumn Festival, an occasion marking the end of harvest and the fullest moon of the year. It seems they can afford to take a break from participating in the stock market: year-to-date, the MSCI China index has increased by over 38 per cent in sterling terms. Chinese shares have been buoyed by a slew of better than expected economic data, particularly in manufacturing. China’s central bank also orchestrated looser monetary conditions last week in a bid aimed at helping Chinese smaller companies.

• The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.

Previously...

Bomb threats fail to bring down market

Increase in interest rate on the way?