Following a tumultuous year in which both the Brexit vote and the election of Donald Trump rocked markets, all eyes are on the horizon and what awaits investors in 2017
Steve Danson – Director – Banks Wealth Management
I hope that focus can now return to growth following the US Election result. Since the financial crisis, central banks have tried to stimulate economic growth through interest rate reductions and through quantitative easing. Growth in the West still continues to be slow and central banks are still finding it difficult to justify increasing interest rates.
Governments will now look more toward fiscal measures such as funding infrastructure projects as well as (I hope) easing the tax burden on business and individuals in order to stimulate growth.
Many companies are cash rich and have the funds to sustain a growing dividend. In the past, the best Companies have shown that they can adapt to the changing economic environment. As a financial adviser I will continue to look at the decisions that the fund managers make and am hopeful that our clients portfolio’s will continue to grow steadily in 2017.
Andrew Gilbert – Investment Manager – Parmenion
Expectations for growth in 2017 have varied significantly based on sentiment and underlying data. Initially, expectations fell significantly following BREXIT, but more recently they have improved on the back of Sterling weakness (especially for those companies with significant overseas exposure) and robust macro-economic data, as illustrated by the Bank of England, which shows that UK consumer spending continues to support the economy, despite a potential fall in capex from corporates.
The demand for income continues to be high as interest rates continue at record lows and may fall even further. In this environment, income is likely to play an increasing role in future returns, especially if the anticipated longer term weakness in the UK economy unfolds as expected.
Bill Hunt – Investment Manager – Raymond James
2017 will probably see the final leg of the bull market where we enter the “euphoria” stage of the cycle but this is likely to end in the second quarter or beyond. The US is seemingly shifting from a policy led market to one driven by earnings which have already been coming in ahead of forecasts. The question is then one of sustainability .World growth remains fragile however and despite this many traditional UK income plays in the FTSE 100 index, which form the core of many UK Equity income funds holdings, are already on demanding p/e multiples. It is therefore difficult to see how these can grow rapidly from here over the next twelve months or so without some kind of correction taking place.
Jim Wood-Smith – CIO – Hawksmoor
I cannot recall a time when the economic outlook was more uncertain. There are many encouraging signs – improving data from China and a pick-up in activity in the US stand out – but equally so many hurdles to overcome. First amongst unequals of these is the impact of higher inflation and higher interest rates on both corporate and consumer spending. On balance we think that Brexit and Trump are positives that will help break the endemic post Financial Crisis sclerosis in policy and growth, meaning that 2017 will see higher nominal growth rates. But it is not something that we are going to bet the farm on.
David Farrance – IFA – Prosperity Wealth
My view for 2017 is that we aren’t on the brink of a massive crash but still in an environment of low global growth as a consequence of a slow, elongated recovery cycle from the crash in 2008.
We will continue to see support from central banks, but further economic stimulus will have a limited effect given what has been done in the past.
However the US economy is showing signs of continued, if moderate growth with higher wages and inflation, equally a Chinese slowdown is having less of a drag on the global economy and oil prices are starting to recover somewhat.
Although growth could be derailed by the impact of a poor Brexit settlement and the results of the US election, my view is that active fund managers will have to work hard to find value in this economic climate but the best will still be able to achieve strong positive returns, but probably not double digits.
Simon Reeks – Wealth Manager – Midas IM
This is a difficult question to answer. We live in uncertain times. The slow and incomplete recovery from the economic crisis has been especially damaging in those countries where the distribution of income has continued to skew sharply toward the highest earners, leaving little room for those with lower incomes to advance.
In the UK, we have seen a shock vote in favour of BREXIT and most recently we have seen potentially one of the most unfavourable candidates of all time win the US election. All this is further evidence of a frustration with the establishment and populist politics starting to prevail.
There is the potential for several more hiccups down the line with the Italian elections later this year and French and German elections in 2017. Heightened geo political and macroeconomic risk will therefore continue to feature heavily moving forward and this uncertainty is likely to keep both UK and global economic growth subdued. There is also a lack of impact from accommodative central bank policy and corporate earnings growth remains under pressure, so we are therefore hesitant about the prospects for fast growth in 2017.
And here’s the view from the BlackRock UK Income fund team…
Markets continue to be dominated by significant political and economic events creating an ever more complex, uncertain and volatile environment in which to invest. Given this backdrop, which is unlikely to change anytime soon, it is crucial to focus on identifying well-managed, cash generative companies that can succeed in the medium and long-term. We expect that the bouts of volatility that will undoubtedly persist going into 2017 and beyond will continue to provide opportunities to buy these companies at attractive prices. Selecting these advantaged companies and being disciplined about avoiding companies where balance sheets are stretched or where there are structural challenges is key to meeting investors’ income requirements over the longer term.