For what is usually a quiet final month of the year, December proved to be a perfect storm of headline risk and macroeconomic concerns. To start, U.S. Federal Reserve Chairman Powell announced the third rate hike of 2018 but didn’t do enough to quell fears of a continued aggressive path to rate hikes going forward, causing bond yields to rise and stocks to sell off.
We saw mixed economic data in Europe. Though U.K. wages have continued to accelerate, Eurozone business confidence dropped sharply due to the overhang of Brexit negotiations and weakening demand from China, which has led to lower European manufacturing export orders.
Lastly, back in the U.S., we saw President Trump demand funding for a border wall and threaten a government shutdown, which contributed to a significant decline in equity markets internationally.
Fortunately, there were some positive takeaways for the month; diversification across equity sectors and asset classes have proven to be invaluable. Firstly, our Shariah compliant solutions held in better than the broader market in December. Secondly, safe haven assets such as fixed income continued to provide modest but stable returns, and gold had an incredibly strong month, returning around 5.4% in Sterling.