Table of contents
Global outlook
The post-COVID-19 economy has been a confusing one for investors. Firstly, in the recovery boom of 2021, we wondered whether the surge in inflation would be transitory or not? Then, in 2022, when we realised it was not, we wondered whether central banks could engineer a soft landing from high growth / high inflation or would we crash land into a recession? The markets assumed the worst and crashed in advance, but the recession never came.
Irish economic outlook
The news that Irish GDP (Gross Domestic Product) grew by 12% in 2022 was greeted with scepticism, as ever, skewed by buoyant exports and the multinational sector. However, there is no denying that employment grew by 2.7% to a fresh record high of 2.69 million. This means that Irish employment is now 9% above pre-pandemic levels, a feat that no other European economy has come close to.
UK economic outlook
The current consensus forecast average indicates that the UK economy will suffer a 0.5% contraction in 2023, the clear underperformer amongst the G7 this year. Why this bleak view? Firstly, UK CPI (Consumer Price Index) inflation was still in double-digit territory, at 10.4% in February, far higher than in other countries.
Global equities
Those of a certain age will remember the original incarnation of the band, The Pet Shop Boys, and their first (and biggest) true hit single, West End Girls. Among some great lyrics in that song is the line “Which do you choose, a hard or soft option?" For most of the last nine months, investors have been asking the same question in relation to global economic growth – hard or soft landing?
Irish equities
Those who think that covering a small market like Ireland must be rather mundane in comparison to the bigger, more ‘glamorous’ global markets would be very wrong. If anything, I’d welcome an interlude now and again! Companies listed in Ireland are, by definition, global in nature, and whilst this quarters multiple topical issues are dominating Irish stocks, none of them are particularly Irish in origin.
UK equities
Given all the negative headlines, investors may not have expected to see UK equities outperform global equities last year, returning 1.2% (in EUR terms) compared to global equities which fell -12.6% (in EUR terms). In fact, performance was so strong, the UK equity market performance was ahead of all major markets in 2022.
Fixed income
During 2022, the US dollar had its strongest run in two decades compared with other major currencies. This strength has prompted global investors to reassess both the impact and role of the US dollar in investment portfolios. In this article, we discuss the merits of valuation metrics that aim to measure how under and over-valued a currency is, in comparison to another.
Money market funds
Money market funds have been around for over half a century, yet they’ve never caught the imagination of Irish investors who were content to earn interest income on their cash through a bank deposit. Currently, with European Central Bank deposit interest rates at 3% and Irish bank deposit interest rates stuck at zero, the interest in money market funds has ticked up significantly.
Liquidity
On Sunday, August 15th, 1971, Richard Nixon changed the course of history. Before that weekend, all national currencies were pegged to the U.S. dollar, which was convertible to gold at a fixed rate of $35 an ounce. By the 1970’s there were far more dollars in overseas hands than the United States had gold to redeem at that price.
Market data
The market stocks referenced in the MarketWatch publication are detailed in this section with performance figures from 2018 to YTD.
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