An air of change
AS we move into the summer holiday period there is a definite feeling that change is just around the corner. Our headlines continue to be dominated by Brexit and (lack of) progress in the negotiations: in the last week or so we have seen a number of warnings from industry on the undesirability of no deal being reached. There is more urgency now as March 2019 is approaching fast and there is a high profile summit at Chequers to thrash out an agreement this week. Concern from industry is understandable as global supply chains are complex and have been developed over decades: it is hard to imagine a last minute deal will allow sufficient time to take account of so much detail. This uncertainty is starting to have an impact on the UK economy, with lower economic growth and questions over the level of investment by companies. This has not yet really had an impact on the stock market, however, which is off its highs but still displaying remarkable resilience.
Change is evident on a global economic basis too. The US is certainly now in a scenario of raising interest rates and there is much speculation as to when this might spill over into the UK. The much anticipated trade war between the US and China is just about to be implemented: a 25 per cent tariff on $50 billion worth of Chinese exports to the US comes into effect this week. The impact of this has yet to be seen and is far from certain but there is the added concern that this may not have sufficient impact on reducing the trade deficit, which might result in harsher measures being taken.
There is also a feeling of change in some market sectors. Take the housing sector, for example: UK house price growth hit a five-year low in June, with London lagging the rest of the country and this deterioration has accelerated in recent months. The retail sector has also hit the headlines recently, with massive job losses and store closures across a wide range of companies, from such stalwarts as Marks and Spencer and House of Fraser to the more recent names such as Poundworld. It is very clear that shopping habits are undergoing a massive transformation and that some shops are struggling to keep up. The announcement of a strategic partnership between French supermarket giant Carrefour and Tesco is another mark of developments in the retail landscape. Indeed it is hard to think of any sector that is not experiencing change of some sort, perhaps this is just an indication of the acceleration in the pace of change.
Over the past month the FTSE 100 has very much stayed in a fairly narrow trading range and many other markets are seeing the same. The summer is often quiet in terms of significant news and hence market activity, but with so many uncertainties on the horizon 2018 may yet prove to be the exception.
:: Cathy Dixon is a director at the Belfast office of Cunningham Coates Stockbrokers, a trading name of Smith & Williamson Investment Management (SWIM). This article does not constitute a recommendation to buy or sell investments and the value of any shares may fall as well as rise. Investments carry risk and investors may not receive back the amount invested. The views expressed are those of the author and not necessarily of SWIM.