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LCP Investment Summary January 2020
Posted on 4 February, 2020 by Administrator
Global equity markets rose 0.3% (in € terms) in January. After a stellar year for equities in 2019, markets fell in early January following the killing of Iranian General Qassem Soleimani in a targeted U.S. drone strike, prompting fears of an escalation in hostilities between both counties and for the region in general. These fears soon receded, as both sides seemed unwilling to inflame the situation. Investors took heart from the signing of the ‘Phase 1’ U.S./China trade deal and also the release of strong U.S. home construction data and a pick-up in Chinese GDP.
However, markets fell for the reminder of the month as the implications of the coronavirus began to sink in, with the rising number of fatalities leading to both travel restrictions within China and the suspension of flights to China. As a result, investors became concerned about the possible implications on both Chinese and global economic growth. European export stocks were well down due to their reliance on the Chinese market.
Longer-dated eurozone bond prices rose 5.5% over the month, with the yield on the AAA Eurozone 15+ Year Index falling to -0.06% by month-end. The Euro Broad Sovereign 10+ Year Index rose by 5.4% with its yield falling to 0.58%. Longer-dated Eurozone bond yields fell in early January over the Iran/U.S. situation but then rose due to the continuing optimism on the U.S./China ‘Phase 1’ trade deal and on improving global economic growth.
However, yields fell sharply again at month-end as the implications of the rapidly spreading coronavirus on global economic growth sank in. Investors also looked to these safe-haven bonds to avoid the volatility in the equity markets.
Sample DC Schemes
All three of our sample DC Strategies rose mainly due to the performance of longerdated Eurozone bonds.