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2016 made a complete mockery of predictions and polls; the world today, according to the forecasters, would look rather different with the UK still a member of the European Union, a Clinton Presidency set for the White House and both US and UK stock markets having fallen in value. In fact, the opposite has proved true and despite several political upsets in the UK, Italy, Brazil and the US many investors made a lot of money in 2016.
The FTSE 100 rallied to an all-time closing high on Friday December 30 of 7,143 – a significant rally based on most companies in the FTSE 100 not relying on the UK solely for their income but rather have global businesses. Any fall in the value of Sterling therefore, results in an increase in the value of this income when converted to Sterling.
So what do the next 12 months have in store for investors?
Dan Kemp, chief investment officer of Morningstar Investment Management says that if an investor ever wants a reminder why we should ignore the political noise, they need to look no further than Brexit, Donald Trump and the rise of equities.
“These events will continue to shape our lives in many ways, but they can’t defy investment fundamentals or economic gravity," he continued.
“2017 is shaping up to be no different. There will be no shortage of events that seemingly throw knock-out punches for markets with the U.S. debt ceiling negotiations set for March, the French election set for May, the German election likely in October and further stresses about high Chinese debt – all of which could trigger panic. Yet, once again, economic gravity will take hold and the long-term asset drivers will eventually win."
For UK investors, stocks may now be overvalued and more volatility can be expected; bond yields are likely to rise with a consequent fall in bond prices. In the USA, technology, financial and healthcare stocks are tipped to do best.
Caution is the watchword for those investing in European stocks. Emerging market stocks dependent on exports should be avoided.