Just over ten years since the start of the global financial crisis, and the global economy is now in recovery mode. Investors were hit hard, with UK and global equities falling by 46% and 38% respectively in the aftermath. Aggressive policy stimulus implemented by central banks and governments was instrumental in reducing the depth and length of the recession.
What do the last few months of the year have in store for investors?
2017 has been an interesting year. Recent political events have clearly illustrated the difficulty of investing on the basis of prediction. We have all become much better at expecting the unexpected; experience has certainly taught us that. Many investors are getting used to a variety of political, financial and economic factors and hopefully learning to look through the ‘noise’. What we do know is that market volatility will continue and areas of value exist, which make asset allocation a key tool when planning your portfolio.
Although fading a little more recently, global equity markets hit all-time highs in the summer with over $10 trillion added to their value in the first half of the year
On the cusp of change
Investors started the year confidently as the ‘Trump reflation rally’ continued from the tail end of 2016. Although fading a little more recently, global equity markets hit all-time highs in the summer with over $10 trillion added to their value in the first half of the year, exemplifying a healthy investor appetite. With the global economy faring better, the changing stance of central banks is evident as the need for emergency policy stimulus is receding, even if the situations in the UK, US and the euro area are different.
With a backdrop of modest global growth at home, there are mixed signals of growth for the UK economy. We have the added complication of ongoing Brexit negotiations to contend with. Weaker sterling has been the key driver of UK blue chip companies with high overseas earnings, nudging the FTSE100 higher. The weaker currency has particularly benefited those industries which export services and goods. Despite inflation remaining above target, many economists do not expect UK interest rates to rise until 2019.
The prospect of normalising economic policy
The past year has shown the benefits of staying globally diversified. Portfolio diversity holds the key to approaching your investments and managing risk. It is important to think about longer-term timescales instead of focussing too intently on short-term events and market fluctuations. What is clear is that independent financial advice is essential to help position your portfolio in line with your objectives and attitude to risk.
The value of investments and income from them may go down. You may not get back the original amount invested.