‘Wait and see’ sentiment gears up as 2018 winds down

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

So 2018 is very soon set to become the year that was. But in truth it will probably quickly become known as the year in which not much progress was made at all.

Brexit has rumbled on ad nauseum and without any real end in sight, interest rates have seen one hike and then reverted back to their ‘lower for longer’ stance, while inflation has ticked up marginally but then been dwindling ever since.

An odd sense of ‘normality’ has prevailed during a year in which, in reality, we have had more than our fair share of upsets. From Brexit to a no confidence vote in the Prime Minister, this has unsettled the markets which hate uncertainty at the best of times.

In more normal times, any one from this series of events would be seen as a major political or economic crisis. But it would appear that we have become so inured to bad news - and not just on the Brexit front, but on all fronts - that no-one seems able to muster up enthusiasm for much this side of 2019.

The only real drama has happened on the high street - and not only the actual high street but the new online version too - which yesterday found itself at the centre of the storm that has ravaged retailers and restaurants and pretty much any business that relies on consumers to put their hands in their pockets and get spending.

So we probably shouldn’t expect any excitement from a raft of economic data scheduled to come in this week. That too is probably going to leave decision makers inclined to sit back and adopt a ‘wait and see’ attitude.

Tomorrow we get the latest round of Consumer Price Index (CPI) inflation data. The CPI rate is the most commonly used measure of inflation in the UK and while it had been forecast to reach a peak of 2.7% in the first quarter of 2018, then decrease to 2.1% by the third quarter of 2019, that’s largely what has been happening.

Since August the actual rate has come in lower than forecast. In September the forecast 2.6% rise failed to materialise, with actual CPI coming in at 2.4% and it has stayed at that rate. November’s forecast is for 2.3% but if the downward trend continues - and the circumstantial evidence would suggest that’s highly likely - that too will most probably prove to be overly bullish.

CPI’s rise, dip and decline also mirrors, to an extent, the experience of Aim-listed online fashion retailer ASOS, which yesterday stunned the market, not to mention the entire retail sector, when it issued a profit warning and promptly saw its shares slide more than 40%.

ASOS, which was widely supposed to be pretty much ring-fenced from the retail rout on the high street by dint of the fact that its solely online, did say September and October was broadly in line with expectations, but that November, which includes both the oh-so-crucial Black Friday and Cyber Monday, was weaker. In fact, it went a step further and said it has experienced a “significant deterioration in the important trading month of November”. So, not quite as cut and dried as had been thought then, when it comes to bricks versus clicks.

On Thursday we are due to get the latest retail sales data. It’s safe to say that October’s figures were pretty disappointing, falling by 0.4% month-on-month, as a result of weakening momentum after the summer. With the problems stacked towards non-food spending and with the crucial Christmas sales period now well underway, high street shop chains will no doubt be bracing themselves for a tough set of November figures. Even then we’ll have to wait until the new year to get an indication of the all-important Christmas sales period, which is arguably the most important month for any retailer. 

For investors, while the temptation may also be to adopt a wait and see approach, that could mean you miss a trick. History has shown, time and again, that time in the market is far more important than timing the market. Meaning that if you wait to jump in at the opportune moment, you could end up missing the boat altogether.

You never know what’s around the corner, as we’ve come to learn this year. But if 2019 is to be in any way more positive than 2018 has been, you’ll want to be there.

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