Interesting times ahead
Recent data shows the global economy faltered in the second quarter of 2019. Policymakers have begun to respond, with the US Federal Reserve (Fed) cutting rates for the first time in a decade, but with the US-China trade dispute rumbling on and another Brexit deadline looming, fears of a global recession have increased.
Second-quarter gross domestic product (GDP) statistics have revealed a significant weakening in growth across most major economies. In the US, for example, GDP rose at an annualised rate of 2.1%, significantly below the 3.1% recorded in the first quarter, while China’s annualised growth rate of 6.2% was the country’s weakest since records began in 1992.
Fed reduces rates
With fears of a potential downturn growing, the Fed cut its key benchmark interest rate by a quarter of a percentage point on 31 July, the first reduction in US borrowing costs since 2008. It also signalled a readiness to provide further support if the economic outlook deteriorated further.
Global growth momentum has clearly waned in recent months and the balance of risks to the world economy appear skewed to the downside. The US-China trade war continues to cast a shadow over growth prospects, while the increased likelihood of a disorderly Brexit is also causing consternation.
Focus on what really matters
Many investors are getting used to a variety of political, financial and economic factors and learning to look through the ‘noise’ to focus on what really matters. Portfolio diversity holds the key to approaching your investments and managing risk. Having different assets in your portfolio from different sectors and global regions is helpful in achieving this. It is important to think about longer-term timescales instead of focusing too intently on short-term events and market fluctuations.
What is clear is that financial advice is essential to help position your portfolio in line with your objectives and attitude to risk. Remember to get in touch if you have any changes in your personal circumstances which may affect your objectives, risk and capacity for loss.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
The information in this article is purely market commentary and does not constitute advice.