by Connor Darrell CFA, Assistant Vice President – Head of Investments
Global equity markets pushed higher last week on the back of clarifying results from the UK’s third general election in five years and a preliminary agreement on a phase one trade deal between the U.S. and China. 

In the UK, Boris Johnson’s conservative party won a sizable majority in Parliament, enabling him to continue as Prime Minister with a much stronger foothold on guiding his agenda forward. For markets, this represents a far smaller probability of a “no deal” Brexit and sets the stage for the UK to finally leave the European Union early next year. A smooth Brexit transition should improve the outcome for UK domestic companies and improve sentiment in equity markets heading into 2020. However, the uncertainty is not completely vanquished, as Johnson’s next challenge will be the difficult task of negotiating new trade terms with the rest of Europe. If progress in these talks proves more difficult than expected, markets could experience additional Brexit-related volatility even after the official Brexit event has played out.

On the U.S./China front, President Trump and Chinese Vice Minister of Commerce Wang Shouwen each confirmed last week that the two countries have arrived at a preliminary agreement which is said to include the cancelation of tariffs scheduled to take effect this week. China also agreed to unspecified agricultural purchases from U.S. companies, some protections for intellectual property, and to opening its doors to U.S. based financial companies to do business in mainland China. Stocks, particularly in Emerging Markets (of which Chinese equities make up a large fraction of total outstanding market cap), reacted positively to the news. However, it should be noted that while tangible progress should be viewed favorably by global investors, this is far from a comprehensive deal and there remain difficult negotiations ahead. Many of the key issues that the United States is seeking to address cut at the heart of Chinese economic policy, setting the table for uncertainty surrounding the tenuous relationship between the two powers to linger into next year and beyond.