Monthly Market Blueprint - January 2017

December capped a positive year for equities, with US indices once again breaking new highs, pulling global stocks along with them as markets cheered higher growth expectations for 2017. Read our January 2017 monthly market review.

Monthly Review: Finishing the Year With a Bang.

The US Federal Reserve drew closer to interest rate normalisation, on the back of an overall more robust macroeconomic environment, hiking its basic interest rate by 25bps, as expected, and projecting 3 rate hikes in the next year. Sterling lost some more ground against the USD and the Euro during the month, but gained against a depreciating Yen. UK large caps gained 5.4% for the month. In Sterling terms, US equities gained 3.2%, European shares gained 7.1%, emerging market shares gained 1.5%, while Japanese shares added 2.5%.  Performance was positive across all sectors, with telecoms and utilities, which had previously lagged, outperforming, while industrials and consumer discretionary underperformed, albeit still in positive territory. Bond underperformance didn’t continue, prices for the UK and Germany picking up, even as the yield for the US 10-year treasury rose from 2.38% to 2.44%. Oil prices picked up (+8.7%) as a deal between OPEC members to curb production came closer to materialisation, while gold prices lost 1.8%.

In the macroeconomic space inflation pressures intensified, especially at the input-price level. However, consumer sentiment remained buoyant, especially in the US, as end consumer goods prices were little changed. Better growth conditions were fostered by both a stronger manufacturing and a stronger service sector in December. British economic growth for Q3 was confirmed at 2.2%, edging up from the previous pre-referendum quarter, on the back of strong consumption and a pickup in exports.

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