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September market briefing

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September market briefing

September has a reputation for being the worst month for investing, something the figures confirm. Since 1950, the Dow Jones has declined by an average of 0.8% in September and similar results can be seen across a range of stock indexes. There are many theories to why this is the case, none of which offer much in the way of a concrete explanation. Thankfully, this year stock markets bucked the trend and, generally speaking, September saw the global markets perform strongly.

In London, the FTSE 100 had an unremarkable month, seeing a rise of 1% to 7,510. Ultimately, a rise is still a rise so this should be welcome. Elsewhere in the British economy, the news is a mixed bag. The high street had a ghastly month; Debenhams suggested that they may close up to 80 stores and RBS announced the closure of 55 branches. Even John Lewis, the ‘golden boy’ of British department stores, saw its profits crash by 99% this month.

Unemployment – at just 4.3% – is at its lowest for over 40 years. However, the threat of a ‘no deal’ Brexit would mean that unemployment will rise substantially. During the month, both Jaguar and BMW warned of factory closures in the event of ‘no deal’. What’s more, Mark Carney, Governor of the Bank of England, said that house prices could fall by 35% over 3 years if the government and the EU can’t come to an agreement. So as well as the high mobile phone roaming charges which are thought to return after Brexit, you might also find yourself in negative equity.

Whatever you think of Donald Trump, the US stock markets love him. September was another good month on Wall Street. The Dow Jones rose by 2% during the month to end up at 26,458, a 7% total rise since the start of the year.

Otherwise, Trump continued his assault on Chinese trade. He announced during the month a that a further $200 billion worth of tariffs would come into effect later this year. China seems to be fairing much worse than the US in their ‘trade war’; its stock markets have fallen by 14% since January, though the Chinese Shanghai Composite index did rise by 4% during September.

Over the summer, the Japanese economy returned to growth after shrinking in Q1 of 2018. The Nikkei 225 index in Tokyo was up 6% to 24,142 at the end of the month. Elsewhere in the Far East, the South Korean market rose 1% to 2,343 and Hong Kong ended the month virtually unchanged at 27,789.

The big news in emerging markets was that HSBC economists have forecast that India will soon become the third largest economy, leaving the UK, Germany, France and Japan by the wayside. Following this good news… the Indian stock market had an awful month, falling by 6% to end September at 36,227.

October will be an interesting month. Chancellor Philip Hammond will announce the final budget before Brexit on 29 October, which should outline his answers to the following questions: a) What is the best way to bring down the country’s 2.7% inflation rate? b) How to fund £20bn extra for the NHS by 2023? c) Is raising taxes or borrowing the best way to fund public services? There have even been rumours of a new form of tax, although the details of this are unknown…

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