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Daily Archives: 1st January 2019

1st January 2019

Credit Outlook 2019 (Free Content)

MARKET CLOSE:
iTraxx Main

88bp

iTraxx X-Over

354.4bp

🇩🇪 10 Yr Bund

0.24%

iBoxx Corp IG

B+172bp

iBoxx Corp HY

B+524bp

🇺🇸 10 Yr US T-Bond

2.69%

🇬🇧 FTSE 100

6970.59, -2.74
🇩🇪 DAX

11136.20, -69.34
🇺🇸 S&P 500

2670.71, +34.75

The good, the bad and the downright ugly…

Greetings for 2019. We’re going be looking at one the most exciting years for a while. That there’s no hiding from the fact that it promises to be just as difficult as last year, riddled with as much – if not greater levels of – uncertainty, and we’re going to need to be on our toes right through it. That’s because many of 2018’s situations will continue to play out this year. Be that the real more material impact of the central bank tightening cycle, tense Sino/US relations and the impact of those trade tariffs, a raft of geopolitical event risks, the various developing friction between the sovereign states of the EU and the establishment, and Brexit. Oh yes, then there’s President Trump.

In 2018 we lost ugly in equities, it was bad in credit and commodities, while (Eurozone especially) rates were the good in performance terms. The Dax lost 18%, the S&P recovered to close around 6% lower (had been a stunning 12% YTD loss just before Christmas), euro IG credit returned -1.2% and euro high yield -3.6%. Brent was down $13 per barrel while Eurozone rate total returns were alone in the black at +0.9%.

The year might have ended in rollercoaster fashion for equities but it was with maximum turmoil. And nearly all of the issues came from the White House generated turmoil. All eyes will remain focused here. In the thick of it all was Trump. In no particular order, we had a partial shut down of the government as Trump battled the Democrats for ‘wall’ funding.

Trump’s foreign policy antics infuriated the US’s global military defence allies, while he was aiming fire at the Fed (speculation he wanted to fire Fed chairman Powell) irritated by their hawkish rate move in December. If ever there was a need to calm the markets amid some serious losses, Treasury Secretary Mnuchin took the rather unusual – rather mis-timed, almost rookie-esque, step to assure us about the banking sector’s liquidity!

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