You are here: Home - Investing - Experienced Investor - News -

Reasons to be upbeat on the prospects for 2017

0
Written by: John Redwood
06/01/2017
While it is unlikely 2017 will offer as merciful an investment climate as 2016, the outlook remains upbeat.

It is unlikely 2017 will offer as clement an investment climate as 2016 proved to be. Further rate rises are likely in the US, while the UK is unlikely to need to cut rates again or to print more money to buy bonds.

Japan may well continue with a large Quantitative Easing programme, but has made clear it wants to keep the 10-year yield at zero with higher rates for longer duration, so it is no longer trying to drive these rates down more. The German influence on the Eurozone would like to start weaning it off large bond buying programmes, though the authorities seem intent on “doing what it takes” to avoid a further deterioration in output. They may decide to taper the programmes in due course. All this makes it unlikely advanced country sovereign bonds will deliver such good returns in 2017.

There is more going for shares, despite the price rises in 2016. The world economy should grow around 3% again this year as last. Attention will concentrate on Donald Trump’s progress with reflating the economy.

So far markets have been enthusiastic about his ideas of expanded infrastructure investment and large tax cuts for both companies and individuals. 2017 will be a year which tests his skills at getting his programmes through Congress, given that some Republicans as well as all Democrats are sceptical about their new leader. It will also define what Trump actually will do on trade. His rhetoric has been menacing to free trade in general and the China trade in particular. We may find that in practice he has limited options and is talked out of anything dramatic. Overall, we expect Trump to be a positive for economic growth.

We expect the UK to grow a little over 2% this year, as last. This is out of line with the fashionable gloom about UK economic prospects based on worries that inflation will pick up, eclipsing wage growth and leading to a sharp fall in consumer activity. We think real incomes should continue to grow a bit this year. Inflation will of course rise to some extent, particularly owing to the increase in oil prices and its direct impact on driving costs.

Fears of general price rises on the back of a lower pound are probably overstated. The background is generally benign for UK companies, made more competitive by the lower pound. Jobs growth has been good and wages, bonuses and overtime have been increasing. Government has been keen to promote higher wages at the lower end.

The euro area should make some more progress with general recovery, aided by the repair of more of the damaged banks. The problems it faces are largely political, with a series of elections in the Netherlands, France, Germany and probably Italy posing a challenge to the current EU and euro area policies.

China continues to expand at a decent pace, but may this year have to announce a modestly lower official growth rate going forward. The long transition to an economy based more on services and domestic consumption, and less on industry and exports, still means pain ahead as mines and factories are closed to bring output into line with market needs.

For 2017, we favour share investments more than government bonds where portfolios can accept such risks. The arrival of Trump in office will produce changes which present opportunities as well as threats to investors.

John Redwood is chief global strategist at Charles Stanley

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

Read previous post:
2179428-piggy-bank-0911
Challenger bank trumps competitors’ deals by upping fixed savings rates

Ikano Bank has increased the interest rates offered on two of its fixed saver accounts, pipping competitors’ deals to come...

Close