March 2019 Market Commentary

April 3, 2019

By Jan Faure

The positive start to the year continued in March with most major indices showing positive returns. Things certainly don’t seem as dire as they did in December.

At the US Federal Reserve’s March policy meeting, the Fed signalled zero interest rate increases for this year. This reflected concerns that global economic growth is slowing and lower energy prices are weighing on inflation. Fed chairman Jerome Powell also mentioned risks from abroad, including slowing growth in Europe and China and possible spill overs from Britain’s exit from the European Union. These were factors that caused the sharp financial-market volatility towards the end of last year.

Brexit is still the thorn in Britain and the EU’s side. Britain’s parliament has rejected each and every Brexit option placed before it. MP’s seem too divided to come to any consensus at all on what to do and how to do it. If nothing is passed by the Commons, Britain is due to leave the EU without a deal on 12 April. Many business leaders fear a no-deal or “hard” Brexit could cause chaos. In the meantime, and ironically, the massive precautionary stockpiling by UK businesses has actually been positive for the economy. Longer-term, however, this is negative as abnormally high levels of inventories are a drag on company cash flows.

As it stands, there are three scenarios that can play out – the UK leaves the EU with no deal; the UK and EU agree to a lengthy extension to allow time for a new approach; and the UK revokes article 50 and remains in the EU. It’s currently looking 50/50 between the first and second scenario although, at this stage, anything can happen.

Turning to commodities, oil prices have had their best start to the year in a decade rising 27% in 1Q19. This is largely due US sanctions against Iran and Venezuela as well as OPEC supply cuts. This rise should be seen in the context of the huge sell-off from October to December last year when oil prices declined 38%.

GLOBAL INDICATORS: Local reporting currencies

Source: Bloomberg,, S&P Dow Jones Indices
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