2016 – What a Year for Investors ! Politicians around the world are getting increasingly nervous, voters have it seems lost their senses, or have they?
After the shock of Brexit and the (alleged) shock of Trump, it would appear that voters are not doing what they are told by the liberal elite and sections of the media. In response the liberal elite have attempted to denigrate this revolt by labelling it populism.
There are further political shocks to come, particularly in Europe. The European Union surely cannot continue as it is presently constituted, the leaders of the EU know this but are unlikely to take practical steps to reform the EU, as there are too many egos at stake, and so will end in tears.
The increasing antipathy towards globalism and liberalism (now irritatingly termed populism) has come to a head because the needs and wishes of the majority are being ignored and real disposable income for many is falling (after taking inflation and taxation into account).
So what does this mean for investors going forward?
Message for Investors for 2017.
The stock market is generating reasonable returns, however real stock market growth peaked in the 1980’s, since then the trend for equities has been downward.
There are compensating factors at work, corporate profitability is high, and companies are generating increased amounts of cash, which is to boosting companies underlying value. This indicates that there will be increased takeover activity.
We believe the stock market will become increasingly volatile, so in order to protect yourselves you need to diversify your assets to a greater degree than normal.
Message for Investors – Diversify
In the UK we have all become accustomed to having a large proportion of our wealth tied up in our home. Our property market is hugely distorted due to the density of our population and restrictive planning rules. This distortion may not persist as Brexit may provide the backdrop for a significant drop in house prices.
How would that affect you?
You may have concentrated all of your wealth creation in your home, and looking forward to “down sizing” to release capital later on in life….
You may be involved in buy to let properties …
Ask yourself this question, how would you feel if property prices dropped by say 35% ….
Message for Investors – Emerging Markets
Most UK Investors have too large a proportion of UK investments in their portfolios, once again given the possibilities for increasing investment market turbulence, is this wise?
Following a strong 2016 for emerging market equities, many investors will be considering whether this can be repeated in 2017.
Templeton Emerging Markets Group, certainly think so, as both chief investment officer Stephen Dover and executive chairman Mark Mobius remain bullish on growth prospects for developing economies.
“Following recent improvements, we expect macroeconomic advances to continue in 2017,” note Dover and Mobius. “This could bode well for top-line growth opportunities and the earnings outlook for emerging market equities.”
The pair added: “Emerging-market countries are still far behind their developed-market counterparts when it comes to overall GDP-per-capita, and so we continue to expect strong growth prospects over the long term.”
Message for Investors – Re-Model Your Portfolios
If you have a large proportion of your assets in stock market investments, you should consider remodelling them, as most investment models have a different combination of assets for 2017.
Whatever you decide to do, we trust that our cautionary note provides food for thought. We wish you all the best in 2017 – Happy New Year!