Investment Market Overview 4Q (Oct – Dec) 2017

With thanks to David (DAN) Norman of TCF Investments we would like to share his market overview covering the period October to December 2017.

Equity (Shares)

Q4 was a strong quarter for both bond and equity markets, despite the Bank of England raising interest rates in November. In Q4 the FTSE All-Share rose by 5.1%, giving an overall rise of 13.1% for the year.

In sterling terms, overseas markets performed strongly. The only lacklustre area was Europe (ex UK) which only rose by 0.3%, although to be fair this area has had a strong year with total gains of 17.2% in sterling terms.

Overall it still seems likely that the “Goldilocks” environment of world-wide growth and low, rising inflation can continue in 2018 providing a positive backdrop for equity markets. But it is important to continue to monitor several key risk areas that lie ahead of us in 2018 and beyond.

Recent growth momentum in the world continues to be positive and seems likely to continue this year. Overall, forecasters are expecting world GDP growth to be around 3% in 2018, similar to 2017.

Bonds

In the bond markets, after an overall weak nine-month period, there was strength, with Gilts rising 2.0%, as did Corporate bonds. Meanwhile, Indexed Linked bonds, which are still in strong demand from pension funds rose by 3.5% to give a 12 month rise of 2.3%.

Inflation

In Q4, inflation across most major countries continued to be stable, although headline inflation rose above 3% in the UK for the first time in several years. This caused the Bank of England to raise interest rates from 0.25% to 0.5% in November. Other countries also tightened monetary conditions, particularly the US with its interest rate rise and the European announcement of a scaling back of its quantitative easing.

There are pressures on inflation with oil prices rising again in Q4 again ending the year at $67 a barrel. The highest oil barrel price in 2 years. There is a risk in 2018 that the recent and forecast increases in interest rates could become too much for economies and equity markets that have grown due to benign conditions.

We hope this short update is useful. Should you wish to discuss the potential impact on your investment portfolio then please do not hesitate to get in touch on 0800 043 8341 and we will be happy to discuss.

 

Past performance is no guarantee of future returns. This blog is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investment or course of action.