Market Summary | December 2019

MARKET OVERVIEW

There were mixed results for markets in December as markets locally took a dive whilst globally, they powered ahead continuing their positive momentum. This capped off a positive year for equity markets with many indices posting impressive returns for the year.

I spent 2019 largely writing on two macro sticking points, the trade war between the US & China and the ongoing Brexit debacle. I won’t jump the gun, but surprisingly December brought positive progress for both issues with resolutions possibly on the horizon in 2020. If anything, it may mean I’ll finally have to find some new content for 2020’s market summaries.

UNITED STATES

President Trump made some progress in his trade discussions with China throughout December, with the first stage of a trade agreement scheduled to be signed on the 15th of January, a good sign for investors as tensions appear to be easing between the two nations.

In December, Trump became the third US President to be impeached during their term. Trump is still expected to hold his job as the impeachment will most likely be rejected in the senate where the Republican party holds the majority. The presidential campaign is expected to heat up next year as America head to the polls in November.

US economic data was positive throughout the month, with economic growth, wage growth, and factory production all beating expectations. Consumer sentiment also rose during the quarter. All positive signs leading into 2020.

The S&P 500 Index (USD) returned 2.86% for the month & 28.88% for the year.
The Dow Jones (USD) returned 1.74% for the month & 22.34% for the year.

ASIA

Broadly, Asia had a very strong December, with investors returning to Hong Kong and lifting the local index 7% for the month. The index has largely been held back by the ongoing pro-democracy disputes for much of 2019, but may represent value for investors trying to pick the bottom.

The Chinese market mirrored that of Hong Kong returning 7% for December, with investor confidence growing as trade tensions appeared to ease. American electric car company Tesla produced its first Chinese made sedans as the company began its pursuit of a slice of the world’s largest car market.

The Hong Kong Hang Seng PR Index (HKD) returned 7% for the month & 9.07% on the year.
The Nikkei 225 PR Index (JPY) returned 1.56% for the month & 18.20% on the year.
The Shanghai Shenzhen 300 PR Index (RMB) returned 7% for the month & 36.07% on the year.

EUROPE

Germany yet again managed to narrowly avoid entering a technical recession when it posted growth of 0.1% for the third quarter. The second quarters growth figure was revised downwards to minus 0.2%, ultimately meaning the economy has not grown for the last 6 months.

Boris Johnson had a very one-sided victory in December’s British election as the conservative party reigned supreme across the nation. The majority means the UK will finally leave the European Union on the 31st of January. The next sticking point… a trade agreement with the EU, which is scheduled to be completed by the end of 2020 but if history is anything to go by, its likely to be completed much later.

The UK’s FTSE 100 PR Index (GBP) returned 2.67% for the month & 12.10% on the year.
The German Dax (EUR) returned 0.10% for the month & 25.48% on the year.

AUSTRALIA

The RBA left rates on hold at a record low of 0.75% at Decembers meeting with the market pricing in a cut in February. It seems the RBA is pleased with the response of the housing sector to the rate cuts, although the cuts are yet to provide any major impact to other sectors of the economy.

The Australian economy enters 2020 growing well below potential growth rates, with excess capacity in the labour market and inflation slightly under 1.0%, below the target rate.

The ASX 200 Accumulation Index fell -2.17% in December. The market was driven by strength in the resources sector with gold stocks dominating the indices’ largest returns. Silver Lake Resources, Gold Road Resources & Northern Star Resources were the months top 3 performers, accounting software giant Xero and chemical company Nufarm rounded out the top 5 positions.

It was a strong year for the S&P/ASX 200 Index, which returned 23.4% over 2019, with the strongest performance coming from the Health Care sector (+43.5%). Despite an apparent struggling consumer market, the Consumer Discretionary sector posted an impressive return (+32.4%) with gains led by JB Hi-Fi (+70.1%).

MARKET RETURNS (LAST 12 MONTHS)

Recent performance has pushed the return of Australian equities ahead of International equities. Performance from equities remains in positive territory whilst returns from cash remain somewhat suppressed.

The above graph summarises the performance of the major financial markets and gives you an indication of how these markets performed over the last 12 months. The graph does not reflect your actual portfolio performance.