Prime Minister May has succeeded in gaining the support of the other 27 leaders of those countries remaining in the European Union for her Chequers Brexit strategy. The question now is will the Palace of Westminster agree that this is better than no deal. The omens do not look encouraging. President Trump hasn’t helped either with his comments that this deal will make an arrangement with the US on trade near impossible.
Despite this shares have remained fairly stable. Our benchmark FTSE 100 Share Index continues to trade around the 7000 level, about 10% below its peak earlier this year. Indeed, markets in general have not had a particularly encouraging 2018. Most are down; some – like those in Asia – are actually in bear territory. Sterling, of course, has had an altogether rougher ride. The Bank of England warning of a collapse in both the pound and our domestic economy if no deal is achieved has added to nervousness in foreign exchange markets.
Even alternative assets, like gold, are failing to shine. Bitcoin has lost 70% of its value this year, but then I’ve never really understood the attraction of this artificial currency. It all adds up to an uncertain scenario, not made any easier by the fact that there isn’t much for investors to get their teeth into at the moment, political shenanigans aside. As I write this, we are too close to the end of the month for much in the way of meaningful economic data to emerge and most companies reporting are of limited interest.
The reality is that, with Christmas just over the horizon, investors doubtless have other priorities to consider. Traditionally shares do well in the run up to the end of the year. It is worth reflecting why this should be the case. It would be too easy to say Christmas parties and a general feeling of goodwill is sufficient to drive shares higher. Instead, it is more likely to be a consequence of year-end tidying up operations by professional fund managers. These days most funds operate to a calendar year-end and for whatever reason there is usually cash to be committed to markets ahead of the year-end valuations.
I cannot think of any reason why 2018 should be any different to previous years. Let us hope we all enjoy the benefits of a Santa rally and enter the New Year with confidence.