Are You Prepared for Investment Market Volatility?

With the recent weakness in equity markets for UK investors and an increase in bond yields, we at gpfm financial planners thought it would be of great help to share some professional thoughts. From the highs and lows of the economy through to geo-political factors, we look at the factors shaping the investment market as highlighted by Heartwood Group.

Concerns

Central banks are signalling their intent to withdraw from their emergency (9-year) stimulus programme. Additionally, Bank of England chiefs are considering withdrawing part of the post-Brexit emergency stimulus. This comes after top Bank of England economists shocked the market with a push for an interest rate hike.

Paris-based Organisation for Economic Co-operation and Development (OECD) predicted the global economy would grow to 3.5% in 2017, with an increase to 3.6% following in 2018.  This would be a result of newfound confidence and investment and trade, rising from previously low levels.

With such changeable predictions, there is a serious risk of global growth nearing cyclical highs.

Catherin Mann, Chief economist at OECD said, “It’s a little more optimistic than last year,”

“What we’ve seen is some cyclical uptick across the board, in terms of consumption, investment and labour market performance.”

Geo-political factors

Other considerations shaping the global market are the geo-political risks encompassing North Korea, Brexit and President Donald Trump delivering on tax reform. With relations between North Korea’s Kim Jong-Un and USA’s Donald Trump fraught with tension, there is a wealth of uncertainty and this is reflected in the investment market.

After much delay, Trump is expected to reveal the US tax reform plan shortly. One of the proposed tax reforms to reach the press were that the 35% rate is lower than the current 39.6% paid by the US’s high earners. Trump had previously stated that the wealthiest Americans would not receive a tax cut under his reform plan.

Whilst it can be easy to perceive all the recent news that’s affecting investments to be negative, there are positives to look out for…

Positives

Heartwood expect reasonable continued economic growth and positive corporate earnings growth. The Office for National Statistics (ONS) stated that the UK economy expanded by 0.3% in the quarter, a rise from 0.2% in the previous three months. Retail and the film industries were services helping to bolster growth, according to the ONS.

In the short term, financial conditions remain very accommodative and supportive of markets.

Beyond the devastating hurricane season, affecting the Caribbean, Central America and some of the southern states of USA, we still expect US GDP to grow.

gpfm are a team of financial planners well equipped with expert knowledge and know-how on how to navigate the investment landscape. For full investment advice contact a gpfm team member today.

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.