DIY Investor Magazine
/
Jan 2017
6
Philip Gilbert,
Head of Fixed Income
Beaufort Securities Limited
2016 - TRULY A YEAR TO REMEMBER;
2017 – SEEKING INCOME IN UNCERTAIN TIMES
So, 2016 is consigned to history, and what an eventful
year it was, the year of the underdog; Nigel Farage,
Donald Trump, and Leicester City. The year that British
sport came of age; the Olympics, Paralympics, Tour
de France, Tennis (who would have predicted this one),
needless to say the England football team was true to
form!
2016 started with one tragedy the passing of David
Bowie (it was for me anyway), and ended with a
massacre in an Istanbul nightclub. In between times it
wasn’t much better, selected highlights include Brexit,
the election of Donald Trump, defeat for the Italian PM
in a referendum, continued global unrest and, most
worryingly, the continued rise in extremism.
I am old enough to remember the news in the 1970’s;
rampant inflation and strikes in the UK, overseas
the Vietnam war and the Cold War, and more locally
troubles in Northern Ireland. Today the world seems
similarly uncertain: in the US, Europe, and Middle East
we continue to see the onward march of extremist
views and politics. Perhaps not unlike the 1930’s when
the crash of 1929 led to similar outcomes; a rise in
authoritarianism, and extremist politicians and leaders
giving the electorate a scapegoat by blaming minorities.
Therefore, my overwhelming hope for 2017 is for a
peaceful and tolerant world. Whilst uncertainty brings
volatility to markets, providing opportunities for short-
term gains it is, at best, unsettling for the retail investor.
But, despite my gloomy comments at the beginning
of this review, the UK stock market has flourished; the
FTSE 100 closed the year at c.7150 climbing from 5600
in February. The same can be said of the other FTSE
indices, so everything is coming up roses, isn’t it?
On the currency markets, Sterling didn’t fare so well;
against the Euro we are at c.1.17 off a low of 1.09,
against the US $ we are at 1.22 off a low of 1.20.
With respect to interest rates, in the UK we had the
unthinkable when the BoE cuts rates to 0.25%, whilst
the US continued to raise rates with a solitary 0.25%
increase at year end. This is reflected in long-term
rates which, in the UK declined along the yield curve,
whereas the US saw the opposite.
Looking forward, the trend in rates looks set to continue,
whilst you would expect to see some increase along the
yield curve in the UK there is little expectation of Base
Rate increasing this year. This, perhaps, is one of the
key points for 2017, with rates in the UK lagging the US,
leading to continued weakness in Sterling against the
US$.
‘FINDING SUITABLE INVESTMENTS WILL
BECOME MORE CHALLENGING FOR INVESTORS
TO SEEKING A REAL RETURN ON THEIR ASSETS’
