What a difference a month makes. A strong start to the year for virtually everything; global equities, commodities, US treasuries, gold and sterling. I concluded last month’s column by saying there were reasons to be optimistic but even I, as an inveterate optimist, did not expect such a strong January. Three main factors are probably responsible for the change in sentiment. First, the Federal Reserve has softened its stance on further tightening of US monetary policy. Nothing wrong with that, as John Maynard Keynes said, “if the facts change, I change my mind”. Inflation expectations in the US have fallen substantially in recent months. Second, the resumption of trade talks between the US and China, which is expected to conclude positively, and third, markets were starting from an 'oversold' position given the precipitous falls in the fourth quarter of last year.
US equities led the way, with the technology-heavy Nasdaq composite up +9.7 per cent and the S&P 500 +7.9 per cent. In continental Europe, the Dax was up +5.8 per cent, the CAC +5.5 per cent and the Italian MIB +7.7 per cent. Far East markets saw the Hang Seng gain +8.1 per cent, the FTSE China A All-Share +4.2 per cent and the Nikkei 225 +3.8 per cent. A mixed bag from the UK, with the FTSE 100 up just +3.6 per cent, perhaps held back by sterling strength, but mid-cap and smaller stocks did better, with the FTSE 250 up +6.9 per cent and the Aim All-Share +7.0 per cent. This was encapsulated in a FTSE All-Share (total return) index gain of +4.2 per cent.