Jillian Thomas market commentary

16th February 2017

Jillian Thomas, founder and Managing Director at Future Life Wealth Management: Despite Brexit still being a hot topic, it is impossible to start this commentary anywhere other than in Washington where, on January 20, Donald Trump was inaugurated as the 45th President of the United States.

So far, the new President is looking to make good on his pledge of -only American first he's pulled out of the Trans-Pacific Partnership and indicated he'll be building a wall along the US/Mexico border. He has also graciously accepted Theresa May's invitation to visit the UK so it will be interesting to view the developments of the ongoing relationship with the US over the coming months. On to the UK and the year got off to a good start for the manufacturing sector, with figures for December confirming that activity in the sector had reached a 2 ½ year high. The Purchasing Managers' Index was up to 56.1 from 53.6 in the previous month, with any figure higher than 50 indicating expansion. There was also strong growth in the service sector, which grew at its strongest pace for 17 months, and the Society of Motor Manufacturers and Traders reported that 2016 had seen UK car sales hit an all-time high, with 2.69m vehicles sold thanks to -very strong consumer demand. There was further food news for the housing market, with the number of first time buyers at a ten-year high despite the average price of a house in the UK going through £200,000 for the first time Halifax recoding the figure as £205,170. Last in the 'good news' column was the IMF upgrading its forecast for UK growth to 1.5% for the coming year (up from 1.1% in October) as it said the economy has -held up better than expected after Brexit. Growth in GDP for the fourth quarter of 2016 was confirmed at 0.6% and unemployment fell by 52,000 to 1.6m. Less welcome was the news that household debt on loans and credit cards has returned to pre-cash levels, with the average UK household now owing £13,000. UK fuel prices also reach an 18-month high as inflation jumped to 1.6% in December from 1.2% in November. There was mixed news from the UK's retailers regarding the busy Christmas period. Next warned of disappointing sales, but several food retailers notably Morrison's and Sainsbury's reported better than expected figures over the holiday period. As always though, the irreversible trend from the high street and towards the internet continued. What did the FTSE 100 index of leading shares make of all the news? In the event, 'not much' was the answer. Despite going through 7,2000 at one point and breaking the records for the number of consecutive days where it rose, the index ended the month down slightly. It finished December 2016 at 7,143 and closed January down 44 points or 0.6% - at 7,099. Finally, McDonald's launched their all-day breakfast with a fanfare as part of the grand plan to revitalise the business. The all-day breakfast has turned out to be a fine example of the Law of Unintended Consequences as rather than draw new people in, existing customers have simply switched from burgers to breakfast, meaning that fourth quarter revenue for McDonald's fell by 1.3%.

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