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Global economy proved more resilient than feared

Equity markets sustained their recent rally as economic data stabilised and trade tensions eased.

The looming UK general election continued to dominate the outlook for UK equities. Early opinion polls suggested the Conservatives were on track for a comfortable majority, leading to a rally in GBP and those stocks most directly exposed to the UK economy.

The prospect of a sizeable Conservative majority in the House of Commons, and a resultant breakthrough in the Brexit impasse, led to UK equities outperforming their global counterparts. Elsewhere, the global economy proved more resilient than feared. Germany which has been at the epicentre of the trade war-induced decline in the manufacturing sector narrowly avoided recession in the third quarter, showing growth of 0.1%. The US remained robust with a reduction in mortgage rates leading to a rebound in the housing market. The generally improving tone to the economic data led to further outperformance of cyclical stocks. We continue to expect a rebound in economic activity in the first half of 2020.