During March, we saw Trump fail to roll back Obamacare, casting doubt over his promised tax reforms. On this side of the Atlantic, the prime minister triggered Article 50 – which was a bit of a non-event. Overall, portfolios made small gains.
March was a busy month for global financial markets, with some key highlights and some unexpected news. On balance, it was a reasonable month for Nutmeg portfolios.
Trump fails first test
As always, the US is the epicentre of global financial markets, and March was no exception.
It was no surprise that the Federal Reserve raised interest rates in mid-March. It also chose to stick with its projection that rates would rise only another two times this year, which the markets greeted with almost-euphoria as it signalled that there wouldn’t be a fast increase in interest rates any time soon.
However, the US equity market fell by more than 1% when President Trump failed to roll back the Affordable Care Act (aka ‘Obamacare’). This failure to deliver on one of his key pre-election promises worries investors. But they’re not worried about healthcare reform. What they are worried about is Trump’s ability to deliver on his election promises to cut taxes and regulation.
Article 50 triggers rhetoric
At the end of March, Prime Minister Theresa May triggered Article 50. Because it was anticipated, it was a non-event for the markets and, as expected, the pound didn’t react.
With the exit process now underway we’re going to hear lots of political rhetoric – from the UK and all the remaining 27 EU member states that must agree to the deal. We’ve already started to see this with the discussions around the future of Gibraltar in a post-Brexit world.
This increase in rhetoric from both sides is likely to influence the UK markets and we expect to see more volatility in the pound.
Overall though, we believe that a hard Brexit has already been priced-in to UK financial markets.
Conversely however, if we move towards a soft exit, perhaps involving an extended transition period where the UK keeps existing free-trade agreements while a permanent trade deal is thrashed out, then we’d expect to see the pound rally and, perversely, negatively affect the FTSE which is being helped by a weaker pound.
How have Nutmeg portfolios performed?
The first half of March was relatively good. However, due to Trump failing to push through his healthcare reforms, the markets sold off somewhat during the second half of the month. Portfolios gained up to 0.5% during March.
About this update: This update was filmed on 4th April 2017 and covers figures for the full month of March 2017 unless otherwise stated. Date sources: Bloomberg and Macrobond.
Risk warning: As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. Past or future performance indicators are not a reliable indicator of future performance.
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Shaun Port
Shaun is the chief investment officer at Nutmeg. He has over 25 years’ experience developing and implementing investment strategies for clients ranging from central banks to pension schemes to charities and private individuals. Shaun holds a degree in Mathematical Economics from the University of Birmingham and is a Chartered Alternative Investment Analyst. He can be found tweeting @ShaunPort.Other posts by Shaun Port
