2019 has been something of a financial roller coaster – will the last quarter be any different – and what should you do to prepare for it?
At Continuum, we keep an expert eye on the markets for our clients. This is what we see for Quarter 4.
There is no doubt about it – the economy has shrunk. The first quarter of the year saw a boom, with businesses stockpiling for a March Brexit. This extra demand faded in the second quarter as companies cut back buying and started using up their stockpiles, and for the first time since 2012, GDP fell in the three months to June. If the figures at the end of this month show another shrinkage in Quarter 3, we are technically in recession as we go into the last quarter of the year.
After the surge in growth in the first quarter, economists expected a slowdown, although some have admitted they have been surprised by its severity. Few forecast a fall in GDP of 0.2%. But is this caused by Brexit, global conditions – or something more fundamental in the UK economy?
The markets – and businesses – dislike uncertainty, and uncertainty about the future seems to be the main result of Brexit and the machinations on both sides of the channel.
In the UK, we have seen the effect in a depressed housing market, and reduced production and even shutdowns from manufacturers. But – even though it has been grinding on for years, the Brexit debacle must end eventually, and whatever form it takes, it will be possible to plan for the future again. The deadline is still set for the end of October (at time of writing). This could mean for the last two months of the quarter, the Brexit brakes on the economy will finally be released.
Businesses may be finding new trading partners, but with Sterling still likely to be depressed, UK exports could look very attractive to the rest of the world.
The global economy
Of course, it is not just the UK that has unsettled economic conditions. The global economy has seen falling stock markets around the world. This may be inevitable as recovery from the financial crisis finally runs out of steam, but it is being made worse by the US-China trade war, which has already spread to Europe. Germany and France may be close to recession as a result of President Trump’s protectionist policies.
There are no signs that tensions between the world’s two largest economies will be resolved by the end of 2019. If the trade wars intensify, the rest of the global economy could be collateral damage.
Q4 could still present economic headwinds for the UK, even if Brexit can be amicably resolved.
Are there underlying problems in the UK?
The effects of trade wars and a no-deal Brexit might keep the UK economy subdued – but it has important strengths.
Employment keeps hitting new records, and wages are growing at the fastest in more than a decade. This can spur a return to growth.
As for business investment, it has fallen in response to Brexit doubts, but not to the levels seen in recessions of the past – and many observers believe that it could recover in Q4 as soon as those doubts are resolved.
There could still be a Q4 slowdown with a hard Brexit. But a return to subdued growth, which could accelerate into 2020 as confidence, trade and supply chain networks are all re-established is just as possible.
How can we help?
Q4 may be challenging. Fortunately, at Continuum we can help you keep up with the latest financial news with our weekly education mailer, and keep track of your portfolio with our Personal finance portal.
We can also ensure you have a financial adviser to give expert advice, whether you are concerned about a particular stock or sector, or if you want to review your entire financial planning.
Getting help with your money, avoiding the pitfalls and seeing the opportunities in Q4 are all easier with our experts working with you. Why not call us today?
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.