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June Market Commentary

Posted on: 2nd Jun 2017 by: CamOuse Financial Management Limited

As we wrote last year, ‘It is tempting to think that Brexit is the only game in town.’ Cross out ‘Brexit’ and replace it with ‘General Election’ and the sentiment holds good. But the rest of the world keeps turning – or in May, grinding to a halt as the WannaCry ransomware attack hit more than 250,000 computers in more than 100 countries, with our own NHS being particularly badly hit.

Once the computers were back up and running, UK growth for the first quarter of 2017 was revised down, whilst US growth for the same period was revised sharply upwards. In France, new President Emmanuel Macron presumably had a small sip of champagne to celebrate his victory over Marine Le Pen.

Who knows what Kim Jong-un drinks, but he may have raised a glass of it to toast another successful missile test in North Korea, further adding to tensions in the Far East.

As to world stock markets, four of the major markets that we cover made good gains in May, whilst two – Russia and Brazil – suffered significant falls. As always, let’s look at the world’s various regions in more detail.


May started with the now regular dose of bad news for traditional British retailers as Sainsbury’s profits fell by 8.2%. House prices were also heading in the same direction, with the Halifax reporting that prices fell by 0.2% in the three months to April, the first quarterly fall since November 2012.

The news was even worse if you are a diesel car owner, with a warning that many cars bought on finance deals could be heading for negative equity as their resale value continues to fall.

BT deepened the gloom by announcing plans to shed 4,000 jobs and the EY Item Club forecast that the UK jobless numbers would start to rise in 2018. The rate is currently 4.7% but the forecasting group is expecting an increase to 5.4% next year and 5.8% in 2019. In particular the Item Club’s report singled out Scotland, where it said automation posed a threat to 1.2m jobs.

By the middle of the month, the Bank of England had cut its growth forecast for the UK economy from 2.0% to 1.9% for this year, with Governor Mark Carney warning of a spending squeeze as inflation rises and real wages fall. Energy price rises saw the UK’s inflation figure up to 2.7% for April.

As we noted above, UK growth for the first quarter of the year was revised down from 0.3% to 0.2% and Government borrowing rose more than expected in April – it spent £10.4bn more than it received in April (£1.2bn more than in April 2016) as tax revenues stalled.

Something else which emphatically stalled was British Airways planes. The company was hit by what it described as a ‘massive system outage’ over the bank holiday weekend, leading to chaos at Heathrow and Gatwick – and ultimately to millions of pounds in compensation.

Despite all the gloom around in May the FTSE-100 index of leading shares enjoyed a good month. It broke through the 7,500 barrier for the first time and closed the month up 4% at 7,520.


There was little to report on the Brexit front in May. There were, of course, a lot of words, negotiating positions and posturing, but with substantive talks due to start eleven days after the UK General Election May was something of a ‘phoney war.’

One interesting development was a poll in Germany which showed 88% of those asked, were in favour of the UK paying its debts to the EU, which are currently put at between £50bn and £100bn depending on who you believe. More than any other European nations the Germans want the EU to adopt a tough negotiating stance. With new French President, Emmanuel Macron, also saying he does not want the EU to compromise we can expect the two sides to be a long way apart when the negotiations begin.


A bad month all round for national carriers as Alitalia went into administration at the beginning of the month, albeit with the approval of the Italian government.

Emmanuel Macron comfortably defeated Marine Le Pen to become France’s youngest leader since Napoleon, but the level of abstentions and spoiled ballot papers suggested that Monsieur ‘None of the above’ would have had a real chance of winning had he been on the ballot paper.

The Euro predictably strengthened on the news of Macron’s victory – and the German economy predictably produced another thumping surplus. Figures for March showed exports at €118.2bn while imports climbed to €92.9bn. These were the highest figures ever recorded and gave a trade surplus of €25.3bn for the month. Angela Merkel said the surplus was due to the weak euro.

Meanwhile, Portugal, one of the countries originally considered likely to follow the same economic path as Greece, was pronounced back to fiscal health by the EU, as its budget deficit fell below 2% of GDP last year.

It was a quiet month for Europe’s major stock markets: the German DAX index was just 1% higher at 12,615 while the French index – having anticipated a Macron victory last month – was virtually unchanged at 5,284.


POTUS – the President of the United States – continues to make waves, headlines and enemies in equal measure. Last month, found him in Saudi Arabia signing trade deals which were worth an initial $110bn and may ultimately rise to $350bn. He promised to slash government spending on health and education and signalled the start of renegotiations of NAFTA – the North American Free Trade Association.

He did take time off to fire FBI director James Comey and global stock markets briefly fell in the ensuing turmoil which all led to the ‘will he be impeached?’ speculation. Never a dull moment…

Away from the peace and calm of the White House the unthinkable happened: sales of iPhones fell. Apple sold fewer iPhones in the first three months of the year – just the 50.8 million – which was down 1% on the same period in the previous year. Apple CEO, Tim Cook, said it wasn’t really a fall, just a “pause” as customers waited for a new phone to be launched.

But there was no pause for Facebook as it reported profits of just over $3bn in the first quarter – up 76% year-on-year as it nears 2 billion users worldwide.

There was however, gloom for the US retail sector – or at least that part of it which trades from bricks and mortar stores. US retail sales were up 4.5% compared to a year ago, but all the growth was online with the US Commerce Department reporting an 11% year-on-year increase. In contrast, ‘traditional’ retailer JC Penney reported a 3.5% fall for the first quarter, with Macy’s and Nordstrom also reporting declining sales.

There was more gloom as Ford – facing weak sales and declining profits – offered voluntary redundancy to 15,000 workers in a bid to shed 1,400 jobs worldwide. But there was some good news at the end of the month as US growth for the first quarter of the year was revised upwards from 0.7% to 1.2%.

Wall Street reacted to the mix of good and bad news as you might expect: having started the month at 20,941 the Dow Jones ended it at 21,009 for a rise of just 68 points.

Far East

May did not get off to a great start in China, with news that output had slowed in the country’s factories and mines. There was better news a few days later as China’s first domestically built passenger plane – built by the state owned Comac – made its maiden flight in Shanghai. Better news, that is, unless you are Boeing and Airbus…

Of even more long term significance was the launch of China’s ‘Belt and Road’ trade plan – an investment of $124bn in an ambitious economic plan to rebuild ports, roads and rail networks. The plan – which aims to expand links between Asia, Africa and Europe – was first unveiled in 2013 and has been described as a new Silk Road.

Elections were held in South Korea, which saw Moon Jae-in become the new president, but it was someone not bothered by trivialities like elections that captured the headlines. As we noted above, North Korea launched a successful missile test, to the widely photographed delight of Kim Jong-un. This put immediate pressure on President Moon, who had campaigned for better relations with the North.

Attention switched back to China at the end of the month as ratings agency Moody’s – worried by the ‘debt mountain’ – cut China’s credit rating for the first time since 1989. For those of you who like credit ratings, it was cut by one point from A1 to Aa3.

The Shanghai Composite index duly took note, falling 1% in the month to 3,117. However, it was the only Far Eastern market to fall, with Japan up 2% to 19,651 while the market in Hong Kong rose 4% to 25,661. Star of the show, though, was South Korea: clearly, the stock market approved of President Moon at it rose 6% to close May at 2,347.

Emerging Markets

As we wrote in the introduction, two of the world’s major emerging markets had poor months in May. The Russian stock market fell by 6% to close the month at exactly 1,900 – it is now down by nearly 15% for the year as a whole, having started 2017 at 2,233.

In Brazil, trading on the stock market was briefly halted mid-month following corruption allegations against President Michel Temer – long since seen as the man to ‘clean up’ the country. Trading was stopped with the market down 10%, as the President was forced to deny allegations that he had given his consent to paying off a witness in a huge corruption scandal. There are plenty of those in Brazil, so expect to hear more of this story. Meanwhile, the stock market finally closed the month down 4% at 62,711.

There were no such worries in India where the stock market enjoyed an excellent month. Having started May at 29,918, it finished the month up 4% at 31,146.

And finally…

Prime Minister Theresa May was roundly condemned for refusing to appear on the BBC’s election debate. Meanwhile in Oxfordshire, a retired politician smiles and slips into his new ‘man cave’ to begin work on his memoirs.

Yes, our former leader, David Cameron, has splashed out £25,000 on a ‘shepherd’s hut’ which he intends to use as a writing room. Unfortunately, competition in the Cameron household appears to be just as fierce as in the Palace of Westminster: Cameron’s son, Arthur, has apparently won the battle to be the first to sleep in the hut. Hopefully, our former leader will soon be able to return to his writing room, as the nation waits with bated breath for his memoirs, reputedly worth £1.5m.

So a splendid return for Mr Cameron on his £25,000 investment. But if he wants really stellar returns he should perhaps invest his money with the Church of England, who apparently made a 17.1% return on their investments last year and whose fund has averaged 9.6% over the last 30 years – comfortably beating many expensively managed city funds and comprehensively outstripping the top-rated Yale University endowment fund.

As we all know in financial services, ‘past performance is not necessarily a guide to the future.’ Or perhaps it is with a little Divine Fund Management.


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Aged between 22 and State Pension Age (SPA) with qualifying earnings over the Auto Enrolment earnings trigger


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Automatic Enrolment earnings trigger


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8% of Qualifying Earnings of which

3% is employer's (starting at 1%)

9% of Basic Salary of which

4% is employer's (starting at 2%)

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3% is employer's (starting at 1%)

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