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.
Though heightened volatility has concerned many investors, it is important to keep in mind that at the current juncture, we have a backdrop of a strong U.S. economy and continued job growth. We continue to stress focusing on long-term wealth growth and not being reactive to short-term swings in markets.
December 2018 Model Portfolio Returns
Source: Reuters Eikon as of December 30 2018. Please note that performance shown are for Wahed model portfolios. Actual client performance will depend on the timing of funding and intra-quarter drift from targets. Past performance is not indicative of future results