December 2018 market overview

Following the positive outcome from the G20 Summit talks, the US and China have entered a three-month truce, causing markets around the world to climb at month start. The increase was short-lived though, and the Dow suffered one of its worst drops in history, falling over 750 points. While December usually sees global markets soar from November into the new year, the end of 2018 experienced little of the usual market optimism.

Hong Kong, China and Japan saw strong market increases at the start of the month as well, each up 1%. However, the arrest of Huawei CFO Meng Wanzhou by Canadian authorities increased doubts over the fragile peace between China and the US. The Hang Seng and Nikkei dropped 2.5% and 2% as a result. China responded by summoning Terry Branstad as US ambassador to Beijing. Results for Chinese industrial production levels and retail sales then caused further concern. The Nikkei and the Shanghai Composite Indices ended the year poorly, with losses of over 10% and over 20% for the year.

After a similarly positive month start, sentiment reversed in the Eurozone with the oil and mining sectors dragging down the markets. Social unrest led to riots in France and reduced services data for December impacted the country’s 2019 growth forecasts. However, the Eurozone reacted positively to Rome’s altered deficit budget, with equities rising towards month end in Italy, and Spanish markets following suit. The FTSE 100 ended the year down approximately 18% while Germany’s DAX is down over 15% from January 2018.

The Pound’s strength decreased significantly as the Brexit vote was postponed, leaving investors feeling even more uncertain over the possible outcome. Additionally, a proposed vote of no confidence in Theresa May brought the Pound and UK markets down further. Having survived the vote, albeit barely, the Pound lifted again towards month end.

While emerging markets wobbled alongside global markets during December, the MSCI Emerging Market Index fared better than the MSCI World Index. But, over half the JSE’s stocks have entered the bear market space and investors gained little from the virtually non-existent “Santa Rally”.

During December 2018 the FTSE/JSE All Share Index (ALSI) gained 4.25% on a total return basis, while bonds gained 0.64%. The SA Listed Property Index (SAPY) lost 1.06% in December, and cash returned 0.60%. Internationally, the MSCI World Index lost 7.60% in Dollar terms but the MSCI Emerging Markets Index ($) only lost 2.81%. This December the Rand lost 3.61% against the greenback and 4.53% against the Euro.

For the year-to-date index measures, the ALSI and listed property returned -8.53% and -25.26% respectively. The ALBI returned 7.69% and cash 7.25%. Internationally, the MSCI World Index returned -8.71% in Dollars.

Click here to view previous market review – November 2018