DIY Investor Magazine
/
Jan 2017
16
2017 INVESTMENT OUTLOOK – STRAWBERRY
INVEST
Following a tumultuous political year in 2016, with the
election of Donald Trump, the UK’s European Union
referendum and the Italian Constitutional Referendum,
political uncertainty will continue to be a theme of 2017.
The French presidential election and German federal
election are due to take place in April and August
respectively. Both of these events have been marked
by the rise of far-right parties (National Front, Alternative
for Germany), campaigning primarily for greater
immigration controls in the wake of terrorist attacks
throughout Europe and the continuing migration crisis.
While it is unlikely at this stage that these parties will
gain power (although as we saw in 2016, anything can
happen), investors and traders are likely to focus on
these events, increasing the potential for short-term
volatility.
However, a likely longer-term impact will be the
increasing influence of the far right on the incumbent
parties’ behaviour. This has already been seen to an
extent with centre ground parties adopting harsher
policies towards immigration, inequality and to an extent
the EU.
The US
The real impact of last year’s votes is yet to be felt. The
election of Donald Trump for president has received
much news coverage; however, he has not yet had the
chance to enact policies or engage fully in international
affairs.Given his erratic nature and unconventional
political beliefs, it is highly likely that there will be
periods of heightened uncertainty as a result of his
actions or comments and their potential impact on
investments. There has been much hope placed on
Trump bringing in policies which will stoke inflation and
drive economic growth. However, given the extent of this
belief, he is likely to disappoint.
bright spot in 2017. Donald Trump will inherit a more
healthy American economy than any president since
George HW Bush in the 1980’s. Furthermore, this will be
supported, at least in the short term, by expansionary
fiscal policies.
The economy continues to add jobs, driving the
unemployment rate lower and increasing wages.
However, the current Trump fiscal plans will add
significantly to the Federal debt which will need to be
addressed at some stage and inequality continues to be
an issue.
The Federal Reserve have guided markets, indicating
that there will be three 0.25% interest rate rises in
2017. Increases ahead of this pathway could lead to
further appreciation of the dollar and pressure on bond
markets.
The UK
In the UK, the Government is yet to trigger Article 50 or
begin negotiations on how the UKs relationship with the
EU will look like. However, Theresa May has pencilled in
March to begin this process.
There has been much disagreement on the effect that
leaving the EU will have on the UK economy, although it
is clear that no one can accurately predict this impact.
However, we can be more confident that there will be
greater uncertainty in the UK economic and political
outlook for some time, which will undoubtedly lead to
greater volatility.
UK commercial property transactions have decreased
sharply, although there has not been a large decrease
in values. This indicates that investors are waiting to see
what the Brexit negotiations bring before taking further
action.
We enter 2017 with equity markets around the world
reaching record highs and bond market yields not far off
historic lows.
