Finding opportunity in 2017
Published: 6 January 2017
If 2016 was the year of political surprises and change, 2017 is shaping up to be the year where the effects of these become clear to investors.
We asked a number of investment managers to share their thoughts on what lies in store in 2017 and what this might mean in terms of risk and opportunity for investors. And while there wasn’t always consensus, there were a number of recurring themes:
A background of turbulence
The most common theme was a recognition that the political turbulence of the past year will have a lasting effect.
A move towards looser fiscal policy
The various events that dominated headlines in 2016, most notably the EU referendum and the
US election, will help shape economic policy for some time to come, according to Andrew
Bell, chief executive of the Witan Investment Trust. He noted that the previous policy response
to low growth - implementing even lower interest rates - appears to have “run out of road and
self-belief”, with a shift towards looser fiscal policy.
The impact of rising inflation
Rising inflation is widely expected to be a dominant theme in 2017. An oil price uptick and the
weak pound contributed to rising prices in the UK in late 2016 and, while those factors may be
temporary, Donald Trump’s plans for stimulus including massive infrastructure investment could
have a more lasting inflationary effect on inflation in the US and elsewhere.
Potentially good news for commodities and emerging markets
Inflation could also benefit ‘real assets’ including commodities, according to Nitesh Shah, of ETF
Securities. “We expect the defensive metals – gold and silver – to gain, largely on the back of
inflation surprises. We believe inflation is likely to run ahead of rate increases in the major
economies and that’s traditionally supportive of gold and silver.”
Opportunities are out there
Overall, it’s clear that the economic climate presents opportunities in 2017. While there are plenty of “hippos in the river”, said Bell, there is “hope to be had from the shift towards more active fiscal policy easing and a gradual normalisation of interest rates”. “Overall equity markets are priced to give patient investors the benefits of global growth but with no windfalls from valuations,” he added. As the past year has emphatically reminded us, all we can really predict with any certainty is that uncertainty lies ahead. So it’s as important as ever to keep an eye on the big picture, remember that short-term volatility is typically smoothed out over the long run and make sure your portfolio is well diversified.
Important informationThese articles are designed to help investors make their own investment decisions. They do not constitute a personal recommendation to invest. If you have any doubts as to their suitability you should seek expert advice. Please be aware that the value of investments can fall as well as rise so you could get back less than you invest.
Laws and tax rules may change in the future without notice. The information here is our understanding in January 2017. This information takes no account of your personal circumstances which may have an impact on tax treatment.
Past performance is not a guide to future performance.