Warning: five risks to your savings in 2013
It has been a rocky road for investors since 2007, as turbulence from the world of politics coupled with a sluggish economy have heavily battered portfolios.
Can we expect something similar in the next 12 months?
Danny Cox, head of advice at Hargreaves Lansdown, highlights the top five things that could throw a spanner in the works for UK investors in the coming 12 months.
1. US fiscal cliff: it will next need to be addressed at the end of February/early March. The likelihood is there will be considerable angst and then it will be kicked into the long grass.
2. Return of problems in the eurozone. Economies seem to be slowly on the mend, but the fundamental problems of debt and a lack of growth have not gone away. One milestone date is the 24th February, when Italy will head to the polling stations to replace Prime Minister Mario Monti – who resigned ahead of term.
3. Holding too much cash: inflation remains above cash interest rates, and may well do so all year, meaning the spending power of savings will fall.
The Funding for Lending Scheme has meant banks are awash with cash and therefore don’t need our money, hence the fall in savings rates. Investors should hold some cash but not too much and consider taking a long term view with the rest.
4. Gilt yields have recovered a little in recent months since we are back in “risk on” mode and may do so a little more, at the expense of their capital values.
Gilts are almost un-investable at the moment, although further quantitative easing would provide a boost. Interest rate rises are not expected anytime soon (2014 or maybe 2015 at the earliest) however if this happened it would will significantly dent the gilt and investment grade corporate bond market .
5. Property: lending remains tight and the residential market propped up by pockets of success driven by foreign buyers. With mortgage credit remaining tight, property is likely to have a flat year and potentially could fall in many areas.