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What’s affecting your investments? January 2018

In this month’s market update, Alex Neilson discusses the wins and losses of 2017

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Topic: Economy, Investing

2017 saw some of the highest levels of global economic growth since 2010 and it looks like the momentum will be carried through to 2018. Buoyed by this economic backdrop, Click & Invest customers saw good returns in 2017. Watch Investment Manager Alex Neilson discuss the wins and losses of the year.

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2017 saw some of the highest levels of global economic growth since 2010 and it looks like the momentum will be carried through to 2018.

We’ve continued to see company profits and stock markets rise across the major influencers of the world economy including China, Asian emerging markets, the Eurozone and America.

And while the rising costs of goods and services is high here in the UK and other parts of the world, without any new shocks, many economies are predicting inflation levels will fall back slightly. So, we can expect central banks to raise interest rates, but only modestly

A growing global economy and moderate interest rate hikes is a good recipe for global markets and we’ve seen key indicators, such as the FTSE 100 index of leading UK companies, repeatedly close at record highs.

Buoyed by this economic backdrop, Click & Invest customers saw good returns in 2017. The standout success story for all portfolios were in Asian and Emerging Markets, where Schroder Asian Alpha Plus returned 37% over the course of the year.

We did experience some challenges with the Empiric Student Property fund, which ran into management difficulties. However, by acting quickly and selling out early we avoided a 10% fall in value.

There is a tendency, after extended periods of positive growth, to start looking for the next recession but even though markets are doing well, the increases are still minor compared to, say, the dotcom boom of the 90s and therefore we see less chance of a significant setback in the immediate future.

If there is a real concern, it’s that the central banks could take a heavy-handed approach to inflation by raising interest rates, possibly too quickly for the growth we are living with. Here at Investec, we believe that central bankers are more worried about the threat of too little growth than too much inflation. But we will be watching for any warning signs in the markets as the year progresses.

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