Market Update

This week witnessed a robust surge in global equity markets, fueled by optimism that China's efforts to curb the spread of the coronavirus might shield the world economy from significant harm. Positive economic indicators further bolstered this sentiment, suggesting a strong start for the global economy this year.
However, it is crucial to approach this rapid market recovery with caution. While we have previously asserted that the coronavirus impact on equity markets might be temporary, the speed of this week's rebound seems premature. The prevailing euphoria implies a degree of complacency, suggesting markets might be underestimating the lingering threat of the virus.
While there is a chance that by year-end, the coronavirus might appear as a minor blip on global growth and equity markets, the immediate repercussions on China and the subsequent global implications remain uncertain. The situation could potentially worsen before showing signs of improvement.
The current scenario has already led to disruptions in production facilities outside of China due to the interconnected nature of today's manufacturing and supply chains. Examples like Hyundai Motor Company halting production in South Korea due to component shortages highlight the global ramifications. Luxury brand Burberry has faced a decline in Chinese sales, with several stores closed in response to the outbreak, and if Chinese businesses resume operations too quickly, it might hamper virus containment efforts.
Despite our long-term optimism for equities, particularly in Asia and Emerging Markets, the prevailing uncertainties and the potential for market volatility demand a cautious approach. We anticipate that coronavirus-related concerns will continue to keep market sentiments on edge until the full extent of the economic impact becomes clear. Therefore, we are maintaining a conservative stance in the short term, holding a slightly higher cash reserve, including liquidity funds.
Looking beyond the virus, recent data from the US indicates continued job growth in January, accompanied by a rebound in wage growth. While non-farm payrolls increased and hourly earnings rose to 3.1%, a rise in the labor market participation rate led to a minor uptick in the unemployment rate.
In the upcoming week, economic indicators to watch include UK & Eurozone Q4 GDP, along with US Consumer Price Index (CPI) and retail sales data.
Additionally, as the tax year end approaches, we urge you to consider utilizing your ISA allowance, which currently stands at £20,000. Failure to utilize this allowance by 5 April 2020 will result in its forfeiture. Please reach out to us, using the contact details provided in your email, to initiate the process.