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Ascencia Investment Management: Weekly Investment Update

Global News

Recession signals – Fears over the global growth slowdown increased this week, after disappointing economic data came out of China and Germany. The increasing fears encouraged investors to sell risk assets and move into safe haven assets, including fixed income. The mass move into haven assets created an inversion of the UK/US 2 and 10 year bond yields on Wednesday, with the 10 year yields dipping below the 2 year yields for the first time since 2007, which is considered by many as an indication that a global recession is on the horizon.

Argentina primary elections – Argentina’s conservative President Mauricio Macri suffered a shock defeat in the latest primary elections on Sunday against centre left opposition leader Alberto Fernandez. This led to a huge, record low, currency depreciation against the US dollar, and a 48% drop in the Argentinian equity market (S&P Merval) in one day. Investors feared that this vote was representative of a crucial October vote, which could see President Marci replaced. The exit of President Marci would end the pro-business agenda currently in place, which includes elements such as: International Monetary Fund loans, a low level of capital controls, and austerity.

US-China tariff delays – US President Donald Trump tweeted that he would delay 10% tariffs due to start on the 10th September on some Chinese goods, including mobile phones and laptops, until the 15th December. President Trump stated that he did not want prices of these items to rise for American families before Christmas. However, the implementation of the September tariffs will still affect products such as agricultural products, clothing and kitchenware.

German economic data – Germany’s gross domestic product (GDP) figure shrank in the three months to June, contracting by -0.1%, as trade tensions weighed on the export dependant manufacturing sector. The annualised output growth figure slowed to just 0.4% for the year to June, the slowest output growth in six years.

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.