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LCP Investment Summary February 2019
Posted on 1 March, 2019 by Administrator
Global equity markets rose over February, up 3.5% (in € terms). Investors remained positive following the sharp market rises in January, and with hopes that the U.S./China trade talks would eventually see a deal struck. President Trump extended the deadline for increasing tariffs on $200 billion worth of Chinese goods following ‘substantial progress’ in the talks between themselves and China. Potential headwinds like Brexit, India/Pakistan/Kashmir and the abrupt end to the U.S./North Korea meeting in Vietnam didn’t dampen investors’ mood too much over the month.
The economic background for markets remained mixed, with German GDP stagnating in Q4 ’18 with exporters hit by the effects of global trade tensions as well as by stricter emissions rules that have hindered car sales. U.S. economic data was mixed with weaker manufacturing and retail sales reports balanced by continued strong job growth and the Q4 GDP growth data which was stronger than expected. The longer truce in the trade talks should boost the Chinese economy as signs emerge that targeted stimulus measures are starting to reverse the slowdown seen in the second half of 2018.
Longer-dated eurozone bond prices fell 1.0% in February, with the yield on the AAA Eurozone 15+ Year Index rising to 0.69% by month-end. The Euro Broad Sovereign 10+ Year Index fell by 0.9% with its yield rising to 1.61%. Eurozone AAA bond yields rose near month-end as receding fears of a no-deal Brexit saw a sell-off of safe-haven bonds, as well as comments from both the French and German Central Banks about normalising the ECB’s monetary policy despite the recent weaker economic data especially in Germany. The stronger-than-expected U.S. Q4 GDP growth also saw yields rise at month-end.
Sample DC Schemes
Two of our sample DC Strategies rose in February as most asset classes were higher over the month, but the Pension Purchase Strategy fell due to its large holding of longer-dated AAA eurozone government bonds.