Quarterly Review

Weather Eyes

David Wheildon / May 2018

Whether basking, breezing or freezing, the weather in the last quarter has seemed to echo the ups and downs of the global financial environment, with many different elements on the change at once. But, as David Wheildon says, experienced investment managers know how to navigate a few ups and downs and the underlying trends suggest a steadier barometer.


We can’t blame the weather for all the investment woes since the beginning of the year but the bad weather both here and in America has not helped the start to 2018. The UK consumer is already struggling with prices rising faster than wages and any further encouragement to stay out of the shops was not welcomed by the hard pressed retail sector. 

Although weather issues only last for a few weeks at worst their knock-on effect can be felt for some time and can have a longer term impact on confidence and sentiment. Until late March markets were either flat or falling since the New Year and this has been reflected in recent valuations – but there’s nothing like a rising temperature and some sunshine to improve sentiment, and since the beginning of April markets have started to move upwards again. 

In the UK we have seen Sterling strengthen appreciably against the dollar which has hurt any overseas holdings and businesses that generate profits from America and this too has taken the shine off investment values.  The FTSE 100 is recovering from the effects of this and moving back towards its more comfortable levels.


Although the definition of “normal” is entirely subjective, the global economy does have the look of an arena that is trying to return to the life it lead before Quantitive Easing was brought into play.  In the UK, inflation is slowly falling and, with limited wage rises, is likely to fall further. As imports become more expensive due to Sterling strengthening we should see less pressure on inflation than we felt a year ago. 

Both in the UK and America the Central Banks have signalled that interest rates are most definitely on an upward movement although this will be slow and in very small steps.  Nonetheless we appear to be moving back towards an economic system when inflation is controlled by interest rates and Central Banks do not feel the need to support their countries’ economies by untried or untested methods.  This does of course bring on the concept of the traditional “boom and bust” scenario that was declared dead in the early 2000s but it is at least a cyclical world in which fund managers are experienced and have charted more settled routes through the troubled waters of the past.  In the investment world there is definitely a feeling of “better the devil you know” and managers feel confident of managing your moneys in times such as these.


The fundamentals of the global economy remain very much the same with China still driving forward its economy at a good rate. Although the recent political steps to effectively hand President Xi a lifelong position might suggest a new dictatorial era, the benefit of this is long term stability with the hand of a proven reformist on the tiller. Provided the absolute power President Xi now appears to hold is not corrupted (absolutely or otherwise) it does bode well for future years of trade with China. 

At the same time President Trump is however bringing protectionism more and more to the fore. This is the way to slow down and eventually halt a global economy rather than increase free trade across continents.  The effects of these protectionist actions will be felt across the world and there is a feeling that they are being brought in more to satisfy election pledges rather than as a sound example of economic strategy.  The only good news is that they appear to be coming more slowly than imagined and they are not being ratcheted up by other countries.

On the political front the North Koreans have decided that they would rather trade with America than go to war and although it is still incredibly early days any positive, more “friendly” moves in this direction are to be welcomed.  Time will tell how serious they are but when your country’s economy is on its knees, nuclear weapons are very expensive to make and you wish to create a positive legacy for your people, then perhaps we should look more confidently on President Kim Jong-un and his plans to improve the economy.

Amongst all these mixed messages the fund managers are picking their way through markets and managing those which are falling and making profits from those which are moving in the right direction.  We do feel 2018 will continue to be a year of steady returns and now that the first disappointing few weeks are out of the way values are generally moving in the right direction again.

This article is the opinion of David Wheildon