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2017 was another good one for investors although it seemed there was little sense of euphoria, even as many equity markets posted new all-time highs. Headlines continued to be dominated by geopolitical events, but consumers and companies around the world did their best to ignore the news, leading to expectations of the highest levels of global economic growth since 2010 and strong corporate earnings.
We are acutely aware that financial assets have extended their gains with unprecedentedly low levels of volatility. We would not be at all surprised to see a correction some time in 2018 and we are currently minded to keep some powder dry for such an opportunity to then add to risk.
From a UK corporate perspective, the results calendar for this week is dominated by retailers. With Mothercare updating this morning, and seeing the share price off c.30% (UK like-for-likes -7.2%) the balance of updates so far is skewed firmly to the downside; only Next has so far provided any (relatively) positive newsflow. This chimes with Visa’s downbeat commentary on consumer spending released today. To come this week it’s the turn of the food retailers, Morrison tomorrow, Sainsbury Wednesday and Tesco on Thursday. For our portfolios, Ted Baker’s results on Wednesday will be watched closely (held where appropriate).
On the political front, talks between North and South Korea tomorrow will hopefully herald a further de-escalation of tensions on the peninsula, whilst Angela Merkel will attempt fresh talks with the Social Democrats to try and end the impasse around forming a government in Germany.