As we approach the end of the year, it is worth reflecting upon the turmoil of the past 12 months, how well financial markets have withstood the onslaught and the opportunities for 2012.
At the beginning of the year the outlook was reserved. The debt mountain was at the forefront of everyone’s minds and there was an awareness of looming cuts and a difficult year.
From the very start there was turmoil. In January, the year started with civil unrest in the Middle East as countries such as Egypt fought for political reform and leadership change. This created a spike in Oil prices and fuel costs which would have an impact on everyone’s disposable income.
The earthquake in Japan took everyone by surprise and it’s devastating impact reverberated around the world both financial and personally. That said the Japanese financial markets soon started to recover as the country started setting about rebuilding their infrastructure.
Soon after, the US politicians failed to reach a decisive agreement on their ‘debt limit’ which failed to convince financial markets that the severity of the debt problem was understood by the political leaders. This meant the US lost it’s AAA credit rating. Whilst this didn’t have an immediate impact it was a wakeup call.
Alongside this the Eurozone sovereign debt crisis continued to build momentum as fears moved from Greece, to other countries and ultimately to the Eurozone as a whole.
This was manifested in the price of Gold which soared to new heights as it was perceived as a safe haven away from government debts.
The Eurozone crisis continues to bubble away but markets seem fairly steady as political leaders struggle to come to terms with the necessity of a fiscal union, likely underpinned by Germany. In line with this the price of Gold has since fallen back from it’s earlier peak.
Closer to home there have been a number of issues regarding spending cuts & changes to public sector pension schemes. Whilst none of these cuts are welcome the necessity of some change is unarguable and, so far, financial markets & investment managers have been pleased with the overall direction of our economy.
Looking ahead to 2012 there are some positives for investors.
It is likely the Eurozone crisis will continue to stumble onwards however as time passes each of the 17 Eurozone countries appear to be moving closer together and a long term plan will hopefully start to form. Once a stable approach is agreed financial markets will start to move forward.
Outside the Eurozone and UK, the wider world is also coming to terms with their debt issues and changes to their political systems. As with the Eurozone investment managers crave stability and as issues are tackled it is likely financial markets will respond.
Within the UK we are probably in a fairly robust position. 2012 is likely to be a year of little or no growth, however some things may start to get easier as inflation starts to lower and pundits will start to look ahead at 2013 to 2016, when they will see returns on investments. As a result financial markets will hopefully demonstrate a steady climb from their current position.
In essence 2012 is unlikely to be a year of dramatic stock market climbs but it will hopefully be a year when investors see a steady positive climb in their valuations where they are invested in the right areas.
As always we are happy to discuss the financial future with any of our clients and welcome the chance to meet in the new year.