A Review of the First Half of the Year – Introduction
In most areas, investors have had a disappointing 2018. Compared to last year, this year has been a shell of its former self. Global risks have increased, treasury yields have flattened, cryptocurrencies have fallen, commodity prices have been sluggish, and the emerging markets have been hammered. In this article, I will look at several assets and how they have performed in the first half of the year.
Global stocks have had one of the worst performances in decades. In the United States, the main indices have had low or even negative growth. In Europe, the major indices have continued to struggle with the DAX and FTSE 100 falling by about 2%. In Asia, stocks have declined with Chinese stocks reaching a bear market. The chart below shows the performance of the major indices.
The negative performance of global stocks is mostly associated with Donald Trump. Ironically, his policies were credited with the booming global stocks markets in 2017. This year, he has been on attack in all fronts. He has exited the US from the Iran deal and threatened to exit the World Trade Organization (WTO). He has also attacked US allies and imposed tariffs on some of the country’s closest allies and foes.
Crude oil has been one of the best performers this year. US WTI futures have soared by almost 20% with the benchmark Brent rising by 16%. The rise in crude oil has been attributed to the tightening supplies and the effect of the US exit from the Iran deal. In Iran, increased volatility has increased with thousands of people taking to the streets to protest unemployment. These protests will increase as more companies leave the country.
Cryptocurrencies were the best performing assets in 2017. This year, they have been the worst performers with most of them being in a bear market. The decline on cryptocurrencies was associated with a number of factors. For example, many traders are worried about the upcoming regulations which could make cryptocurrencies ineffective. There has also been concerns about their effectiveness since they are not fast, secure and reliable as the fiat currencies. In recent months, some of the biggest exchanges have been hacked into. The chart below shows the disastrous trend of the cryptocurrencies.
US treasuries are some of the most closely watched financial instruments in the world. They are often used as an indicator of risks in the markets. When there are high risks, the bonds tend to go up. When the two-year yields move up at a faster rate than the ten-year, traders usually see that as an indicator of risk. Year-to-date, the yield curve has been flattening and there are indications that it could invert later this year.
Copper was one of the best performing commodities a year ago. This year, the trend has reversed and it is one of the worst performing commodities. The concerns about copper are that the global economy might have some problems in the near future as a trade conflict escalates. There is also a concern that the supply might increase at a faster rate as mining in Chile accelerates.