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

Five key investment issues to consider in 2017

0
Written by: Julian Chillingworth
05/01/2017
If last year is anything to go by, then 2017 could be another volatile ride for investors. With this in mind we focus on five key issues which you may want to consider when thinking about a potential investment strategy.

Equities are buoyant despite rising political risk

To date investors appear to be giving Donald Trump the benefit of the doubt, emphasising the positive impact of his proposed fiscal stimulus measures rather than any potentially damaging trade proposals he may enact. We believe this is a leap of faith. Instead we are heading into 2017 cautious on the prospects for global equities. Ahead of key elections this year, equity valuations in the eurozone are not cheap compared with their long-term average. In contrast, investors have started to penalise UK-focused stocks as Brexit negotiations approach.

The road ahead for bond markets

In recent years economic growth has been lacklustre and inflation lower than expected. Bonds have defied expectations and at times delivered returns that have exceeded equities. However, with government bond yields still low they are likely to underperform in many scenarios. Little other than a recession would see them earning positive returns and we see little chance of a downturn this year. Increasing inflation expectations tend to be bad for government bonds but high yield credit and inflation-linked bonds can perform well in an inflationary environment. On balance, we believe investment grade credit offers the best risk-reward profile heading into 2017 with high yield bonds a close (but riskier) second.

The emerging markets conundrum

A Trump presidency would harm emerging markets this year in three ways: increased protectionism; changing patterns of global capital flows; and the impact of a strong dollar. EM equities started to look more attractive last year and were outperforming developed markets. Federal Reserve tightening may appear to be a risk, but they have outperformed developed markets through the past three tightening cycles. The question remains, should investors continue to invest in EMs because the fundamental case looks strong or sell to protect themselves against the risk that Trump pursues policies which are negative for EM growth?

The resilient UK commercial property market

UK commercial property values grew by 2.4% in the first half of 2016, but gave these up after the European Union referendum. Activity recovered in the third quarter and the sector has been more resilient than many expected. At the sector level, central London property is suffering from uncertainty over whether international firms will relocate and high-street retail and shopping centres have continued their downward trend as consumers shift online. This has underpinned demand for out-of-town warehouses and logistics centres.

The green revolution

Although costs for electric vehicles have reduced, purchase prices remain a barrier. However, better, cheaper batteries and government targets have increased the popularity of electric vehicles, with far reaching implications. These include the impact on oil prices, demand for lithium for use in batteries, as well as the business models of existing car manufacturers. Drivers in towns and cities may decide to use Uber and car clubs like Zipcar, rather than continue private ownership.

Julian Chillingworth is chief investment officer at Rathbones

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.

Autumn Statement: Everything you need to know at a glance

Yesterday Chancellor Jeremy Hunt made his first fiscal statement in the role, outlining a range of tax measure...

End of Help to Buy: 10 alternatives for first-time buyers

The deadline for Help to Buy Equity Loan applications passed on 31 October. If you’re a first-time buyer who...

Moving to an energy prepayment meter: Everything you need to know

As households struggle with the soaring cost of energy, tens of thousands of billpayers are expected to move o...

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.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week