Cat: CFM News
09 Jan

Market Commentary Q4 January 2015

Global equity markets ended the quarter broadly positive, following a period of increased volatility due to a number of adverse events. Markets were nervous over the escalation of the Ebola virus and the potential severity, once it had spread to countries outside of West Africa. The IMF downgraded its global growth forecast slightly across 2014 and 2015. On a country-specific basis, there were sharp downgrades in Russia, Japan and the Middle East, while the US experienced a sharp forecast upgrade. The falling oil price was a headline topic with crude oil (Brent) falling around 40% over the quarter. The impact has been severe for many oil and resource sector companies as well as countries which are heavily reliant on oil revenues. Conversely, the falling price has led to lower fuel costs for consumers, which will contribute to economic growth within many developed economies.


US equity markets delivered strong returns and surpassed all-time highs over the quarter. Third quarter GDP rose to 5% q/q in its final estimate, beating market expectations. This was the highest level recorded since the third quarter in 2003 and was led by consumer spending, investment and lower imports. The US Federal Reserve announced the end to its quantitative easing program, reducing monthly bond purchases from $15bn to nil. Unemployment was unchanged at 5.8% in November, in line with expectations and around the lowest level in 6 years. Industrial production rose significantly to 5.2% y/y in November, as consumers spent more on cars, electronics, furniture as well as other goods given an increase in discretionary income. Inflation fell to 1.3% y/y in November, experiencing the greatest monthly decrease in 6 years. Lower energy costs was the largest downward contributing factor.

European equity markets were flat over the quarter, amongst a period of high market activity. The European Central Bank unveiled plans for its ‘private quantitative easing package’ early in the quarter. This included purchases of asset-backed securities and covered bonds which will be purchased over at least a 2 year period. Third quarter GDP rose to 0.2% q/q in its second estimate, in line with expectations. Household and government expenditure boosted the overall economy, while investment and external trade pulled the rate lower. Inflation fell to 0.3% y/y in November, in line with expectations. The fall was led by lower energy prices where deflation was recorded in 4 member states. Unemployment was constant at 11.5% in October, at around the lowest level in 2 years. Ministers in Europe approved a request from Greece for a 2 month extension to its bailout program, which was prepared to end on 31st December. The Greek Prime Minister, Antonis Samaras, announced that the country’s presidential elections would take place on 17th December. As the country’s new President was not elected, further elections will take place in late January.

UK equity markets were flat overall, buoyed by stronger returns from medium-sized companies. UK third quarter GDP remained unchanged at 0.7% q/q in its final estimate, in line with expectations. Household and government consumption were the largest contributors to economic growth. Inflation fell to 1% y/y in November, a 12 year low. The fall in inflation was largely a result of lower motor fuel costs as well as falling food prices. Wage growth increased to 1.4% y/y in the third quarter, outstripping inflation for the first time since March. The ONS announced UK house prices increased 12.1% y/y in September, with an 18.8% y/y rise recorded in London markets. This was the highest annual growth rate since 2007, although house price appreciation has reduced more recently.

Asian equity markets were higher encouraged by a surge in Chinese markets, as well as strong returns registered in Japan. Chinese third quarter GDP fell to 7.3% y/y, although was slightly ahead of expectations. The growth rate marked a 5 year low, driven by lower property investment, industrial production and credit growth. The Chinese central bank cut interest rates by 0.4% to 5.6%, to help boost economic growth. Inflation fell to 1.4% y/y in November which was a near 5 year low, well below the government’s inflation target for the year. Chinese authorities confirmed the integration of the Shanghai and Hong Kong stock exchange, improving trading and access for international investors.

The Bank of Japan announced significant increases to the scale of its quantitative easing program with the purchase of various assets. Japanese third quarter GDP rose to -0.5% q/q, slightly below expectations. The announcement placed the country in technical recession. Prime Minister Shinzo Abe immediately proposed postponing the planned second round VAT hike until April 2017, to ensure economic recovery. Abe then called for a snap election to secure support for his economic reforms, which he won with a two-thirds majority vote. Inflation fell to 2.4% y/y in November, an 8 month low, driven by falling oil prices and slower consumer spending. The rate was 0.7% y/y, when stripping out the impact of April’s consumption tax increase. Unemployment remained at 3.5% in November, unchanged from the previous month’s figure.

Emerging markets were marginally lower over the quarter, with much disparity among individual countries, largely driven by mixed reactions to lower oil prices. The fall in the oil price adversely impacted those emerging countries which are heavily reliant on revenues from energy exports. The fall has been subject to multiple factors including increased supply largely from the US and decreased demand from slowing economies. Over the period, OPEC agreed to maintain the supply of oil at current levels in the interest of restoring market equilibrium. This placed further downward pressure on the oil price, as many expected the organisation to cut supply and support prices.

Dilma Rousseff narrowly won the Brazilian presidential election on behalf of the Worker’s party. The Brazilian central bank raised interest rates by 0.5% to 11.75% in order to control inflation, which has been above its target range since June. The Russian central bank increased interest rates multiple times over the quarter including a 6.5% rise in a single day, to combat inflation and support the currency. The finance ministry later sold large quantities of its US dollar reserves for rubles in order to tackle further currency depreciation.

In fixed income markets, yields on government bonds fell leading to positive returns for investors. Yields on the UK, German and US 10 year bond ended the quarter at 1.79%, 0.55% and 2.21% respectively. The fall in bond yields was encouraged by lower inflation expectations, largely associated with lower energy costs. The increased expectation that the European Central Bank will eventually announce more aggressive quantitative easing measures helped drive bond yields lower in related markets.

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Cat: CFM News
18 Nov

Market Commentary November 2014

Global equity markets were mixed over the month. Earlier in the period markets reacted negatively to the IMF downgrading its global growth forecast including sharp cuts in the Middle East, Russia and Japan, whilst sharply upgrading the US. Some markets came back to deliver positive returns for investors following a raft of more encouraging economic data and further stimulus measures announced by multiple central banks. Lower commodity prices adversely impacted selective emerging countries which are more reliant on revenues from materials and energy.


US equity markets provided strong relative returns over the month, as the market pulled back from an early dip. More defensive sectors including consumer staples and health care outperformed, while consumer discretionary and IT lagged the broader market. The US Federal Reserve announced it would be ending its stimulus program, which was widely anticipated by market participants. US unemployment fell to 5.9% in September, lower than expectations.

European equity markets ended the month lower, following worsening economic growth expectations. Industrial production in Germany experienced its greatest month-on-month decline since January 2009 in August. This was hindered by weak demand across Europe and China, as well as trade disruptions with Russia. Interest rates were left unchanged at the European Central Bank meeting. The bank however unveiled plans for its private quantitative easing package which included two years of asset purchases to stimulate the economy. The President later announced that the bank would consider additional stimulus measures if required. Eurozone inflation fell to 0.3% in September, the lowest level recorded in 5 years. 8 member states logged deflationary numbers. Unemployment was unchanged at 11.5% in August, in line with expectations.

UK equity markets suffered marginal losses over the month. UK third quarter GDP fell to 0.7% with the services sector showing the greatest contribution, slightly offset by decreases in mining and quarrying. UK CPI inflation fell to 1.2% in September, its lowest level in 5 years. The fall was largely attributable to lower transport costs and lower prices on recreational goods. Unemployment fell to 6% in August, falling lower than expected. Retail sales fell to -0.3% in September, largely impacted by significant falling clothing and footwear sales. The Bank of England announced no changes at its central bank meeting.

Asian equity markets performed well over the month, led by Hong Kong and Australian markets. Chinese third quarter GDP fell to 7.3%, driven by lower property investment, credit growth and industrial production. This marked the lowest annual growth rate in 5 years. CPI inflation fell to 1.6% in September, almost at a 5-year low. Chinese trade data surprised markets with import and export data much higher than expected. Japanese equity markets recovered early losses following the announcement of aggressive stimulus measures by the central bank. Japanese unemployment fell to 3.5% in August, lower than market expectations.

Emerging market equities ended marginally higher, led by the Emerging Asia region. Further falls in the oil price had a negative impact on more dependent countries, including Russia and UAE. The Russian central bank increased interest rates by 1.5% to 9.5%, in order to combat against currency falls. Poland cut rates by 0.5% to 2%, following more positive economic data. Dilma Rousseff narrowly won the Brazilian presidential election on behalf of the Workers’ Party. Equity markets suffered initially as Dilma was seen as less business orientated, compared to her opposition.

Fixed income markets delivered positive returns for investors, following lower bond yields, leading to higher prices in core government and corporate bonds. This came as central bank minutes generally supported a more hawkish view which pushed out expectations of an interest rate rise. The US central bank confirmed the end to its quantitative easing program, which will cease further bond purchases. Conversely, the Bank of Japan announced it would be buying more government bonds, as part of its additional stimulus program.

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Cat: CFM News
19 Dec

Exam Success for Jemima

Everyone at CFM would like to congratulate our office manager Jemima Fitzsimmons for completing the Certificate in Paraplanning exam.

This qualification meets the specific needs of paraplanners, by offering a dedicated qualification route that develops paraplanning skills and expertise, and imparts advanced technical knowledge in a number of key advisory areas.

Jemima is now entitled to use the designation  CertPFS (Paraplanning).

Cat: CFM News
17 Oct

Market commentary October 2014

Global equity markets suffered losses led by weakness in Asian and emerging markets. Poor data in China as well as protests in Hong Kong caused some disruption. Broader emerging markets were impacted by falling commodity prices which have seen increased supply combined with weaker demand from China. The European Central Bank surprised markets with a further cut in interest rates, while the US Federal Reserve continued to tighten monetary stimulus. In the UK, markets failed to gain traction by month end following nervousness around the referendum vote. Fixed income markets suffered but later offset some losses as investors sought after safety from global events.


US equity markets fell over the month, with the broader market brought lower by cyclical sectors including energy, consumer discretionary and IT. Second quarter GDP rose to 4.6% in its final estimate, mostly attributable to increasing business investment and exports. The US Federal Reserve announced further reductions to its quantitative easing program, reducing monthly purchases from $25bn to $15bn. Unemployment fell to 6.1% in August, in line with expectations. Retail sales rose to 0.6% in August, led by a sales increase in automobiles and building materials & garden supplies. US new home sales rose to 504,000 in August, highlighting the biggest one month jump since 1992.

European equity markets were marginally positive over the month. The European Central Bank announced an interest rate cut to 0.05% and further lowered its negative deposit rate. The bank added that it would initiate a private quantitative easing package to help boost lending and liquidity. The euro was adversely impacted by the news, having a favourable outcome for export companies. Eurozone industrial production surpassed expectations, rising to 2.2% in July, higher than the previous months’ figure of nil growth.

UK equity markets ended the month lower, following market nervousness ahead of the referendum vote. The Scottish referendum ended with a 55% majority voting against the country becoming an independent nation. The latest Bank of England minutes revealed that 2 members (out of 9) again voted for an increase in the interest rate, taking the view that wage inflation may rise soon. Unemployment fell to 6.2% in July, lower than 6.4% the previous month. CPI inflation fell to 1.5% in August, attributable to lower fuel and food & non-alcoholic drink prices. UK retail sales rose 3.9% in August, driven by a sales increase for household goods.

Asian equity markets experienced sharp falls over the month, following a period of poor macroeconomic data and lower commodity prices. Chinese industrial production, retail sales and fixed asset investment all fell short of expectations. In Hong Kong, thousands protested against planned changes to the country’s democratic elections system, causing stock market and currency weakness. The central bank later announced liquidity measures to support markets. The People’s Bank of China also reported it would be injecting 500bn yuan stimulus into the five biggest banks, in the form of low duration, low interest rate loans. Japanese equity markets gained with export companies benefitting from yen depreciation. No changes were announced at the Bank of Japan meeting.

Emerging market equities were negatively impacted by commodity losses and poor data in China, as well as a number of adverse market events. Brazilian markets suffered as a result of election opinion polls showing Dilma Rousseff gaining momentum as the country’s future President. In Russia, President Putin outlined plans for ceasefire in eastern Ukraine, although the Ukrainian Prime Minister dismissed the proposal. The US and EU later implemented a new round of sanctions targeting Russia’s financial, energy and defence sectors. Turkish markets suffered following weaker second quarter GDP and higher inflation.

Fixed income markets were initially hindered by investors bringing forward interest rate rise expectations, leading to higher government bond yields. The bond market was later supported by investors seeking safety from global events. Investment grade corporate bonds generally outperformed government b

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