The final few months of 2018 were a dark time for the world’s stock markets, with concerns about US trade policies and the effects of Brexit uncertainty leaving many markets posting an overall loss for the year.
The prospects for 2019 did not look bright, with the spectre of the US Federal Reserve continuing to raise interest rates after its fourth rate increase in December.
Six months on, however, the doomsayers appear to have been on the wrong track. Reuters, not known for its investment hyperbole, ran a story suggesting that it was “The best first half for financial markets ever”. As the table shows, major stock markets all produced solid returns, despite the continued headwinds from the same sources that produced negative results in 2018.
It helps that the interest rate picture has now altered significantly around the globe. Current expectations are now that the Federal Reserve could cut interest rates as early as July and keep cutting thereafter. Yields on US government bonds dropped over the first half – and hence their prices rose – in anticipation of the reversal. The benchmark 10-year US Treasury bond, which began the year yielding nearly 2.75% accompanied by predictions that 3% would soon be breached, ended the first half at 1.99%. On this side of the Atlantic, the yield on 10-year UK gilts dropped from 1.26% to just 0.79%.
These last six months have once again reinforced a lesson about investing in shares: timing investment is all too often a fool’s game. There were few people shouting ‘invest now’ at the end of last year, even though it would have been a rewarding call.