2016 was a torrid year dominated by political tensions, global changes and a rebuff of the status quo. Yet at the end of the year the main stock market indices maintained their surge and finished the year in positive territory.
As 2017 gets underway the FTSE 100 has again pushed its way upwards.
Despite this optimism, 2017 still looks like a challenging year for investors as Brexit negotiations continue, President Trump takes office and European countries face key elections.
Arguably one main reason for the FTSE 100 maintaining it’s high level is the strength of the pound. Whilst Sterling exchange rates remain poor compared to other currencies the larger companies look forward to greater profits which in turn boosts their share prices. Sterling though is likely to recover over the long term which would then put pressure on those same FTSE 100 firms.
That said, investors shouldn’t panic and the outlook need not be gloomy for diversified investors.
For example, the sustained period of low interest rates and exchange rates is helping the smaller companies, i.e. those outside the FTSE 100. These companies take some time to benefit from the economic conditions and this is slowly starting to filter through.
Equally other asset classes such as property continue to generate steady returns. Property can be a complicated investment, yet as a minor portion of any portfolio it is now showing ‘reliable’ returns in a very uncertain world.
There will also be some good opportunities arising for corporate bond investors, although the sector will continue to be punished in the short term by low interest rates and a weak pound.
Looking at the year ahead it is important not to get distracted by the media. We seem to be inundated with in-depth negative analysis of every slight comment and tweet.
Long term investors and financial markets will return to what is described as value investing, which is selecting investments based upon long term profitability and fundamentals.
This value style investing lends itself to a balanced investor who has a diversified portfolios of different asset classes and funds. Investors also benefit from selecting fund managers capable of picking out the quality investments rather than a scatter gun approach designed to follow the average index.
As always it is important to continue to review any investments on a regular basis. For our clients, we are constantly mindful of the pitfalls ahead and will help to alter your portfolios to benefit from future opportunities.
We look forward to helping review your plans. However, in the meantime, don’t hesitate to get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.