Global equity markets fell during March, as investors fretted about threats to global trade following news of President Trump’s proposed tariffs on imports including steel and aluminium, and of the possibility of reprisals from other major economies. China responded by claiming that, while the country did not want a trade war, it was not afraid of one.
The President himself is visibly leading the trade and tariff policy, while some of the White House supporters of free trade and limited global intervention have now disappeared from the scene. People who are more enthusiastic about tariffs and about a more muscular intervention around the world have replaced them.
Among the likely losers from any trade war are China and Germany. Both would be affected if the US presses ahead with a wide range of tariffs and restrictions on their exports to the US to match the restrictions they place on US companies. If the EU perseveres with tariffs in response, and with its measures against large multinational digital firms, they may invite an intensification of US tariffs against them. This will likely cut EU exports to America. China is likely to lose some market share for goods exports, and to give up some of its access to US tech acquisitions and US Intellectual Property.
Against this backdrop global equity markets were weaker, with Asian and European indices all sharply lower, and this was reflected in the Investment Association sector averages. Emerging market equities were also significantly down, with the widespread sell-off generally hitting recently strong-performing areas hardest.
The technology sector was particularly affected as US e-commerce and social media giants could be caught up in any trade war. It was also in the spotlight following a major controversy involving Facebook. Shares in the social networking site fell following reports that personal data of 50 million users had been misused by a political consultant.
The technology sector has been a major driving force behind the rally in the world’s largest economy and US stock markets were among the most impacted by the month’s falls. Fears over heightened regulation tested investors’ risk appetite as the so-called FAANG (Facebook, Apple, Amazon, Netflix, and Alphabet’s Google) stocks suffered their worst one-day loss as a group in the final week of the month. The North American and Technology & Telecoms sectors were the worst performing of Investment Association averages over the month.
UK equities fell, but they were not as badly affected as other areas having lagged beforehand. A boost following a development in Brexit negotiations also helped. A joint report was agreed with the EU, which stated that the UK would maintain regulatory alignment to prevent a hard border.
Top performing investments were found in perceived havens, with UK government bonds faring best. An interest rate rise in the US failed to dampen investors’ enthusiasm for quality bonds with the move from the Federal Reserve widely expected. Global trade worries aside, signs point towards healthy economic growth across the Atlantic with Fed Chair Jerome Powell saying that the central bank will continue with its plans to raise interest rates over the coming months.
Although investors should be aware past performance is not a reliable indicator of future results, here are the top and bottom ten Investment Association funds and sectors for March 2018 in full:
Top 10 funds:
Bottom 10 funds:
Top 10 sectors:
Bottom 10 sectors:
Past performance is not a reliable indicator of future returns. Figures are shown on a total return basis, bid to bid price with net income reinvested; Source: FE Analytics, data for March 2018: 28/02/2018 to 31/03/2018. Onshore and retail open-ended funds only.
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