Economic Commentary – September 2018

October 1st, 2018, by Martyn Torevell

The FTSE 100 index ended September at 7,510 having started the year at 7,687, a fall of 2.3% in capital terms. When dividends are taken into account, the UK market has produced a modest positive return of 1%. Whilst the market index is little changed overall, the first nine months of 2018 have seen a high degree of volatility. The FTSE 100 index fell to a low of 6,867 in March, before reaching a new all-time high of 7,904 in May. The last three months have seen the FTSE fall slightly (by 0.7%) with the index fluctuating between 7,800 in mid-August and 7,220 in mid-September.

The majority of global equity markets have also struggled to find a clear sense of direction. The significant exception has been the US stock market where the S&P 500 and Dow Jones indices were trading close to their all-time highs at the end of September. The S&P 500 index has generated a positive return of 8.9% in the last quarter and is up by over 14% since the start of the year. The S&P 500 has not fallen by 20% (a bear market) for more than a decade, making this the longest bull market in US and global markets since records began.

In contrast the MSCI Europe ex UK index is up by 3% in the last quarter but losses in the first half of the year reduced the total return for the first 9 months of the year to 1.3%. The MSCI Asia Pacific ex Japan index is showing a loss in both capital and total return over the last quarter and since the start of the year with the Chinese Shanghai index falling by 20% from February to September.

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