Financial outlook – what can we expect to see in 2016?
The good news is that Britain is regarded by the International Monetary Fund(IMF) as a shining light amongst otherwise gloomy world economies. In October, the IMF revised upwards its forecast for UK growth in 2015, whilst at the same time downgrading advanced and emerging economies, with China being amongst those falling.
For 2016, the IMF predicts UK growth at2.2%. It expects to see continued steady growth supported by lower oil prices and continued recovery in wage growth.
Following the release of these figures, Stephanie Flanders, who is now Chief Market Strategist for Europe at JP Morgan Asset Management, commented on her view of the UK’s future prospects and the potential effect on investment returns:
In the years after the financial crisis, it was great to be an investor, but perhaps not great for the economy. You had low growth, low inflation, low interest rates,and rising asset prices. But the signs are now that this is starting to change, for much of that period there was a high level of employment in the UK, but wages were low. It is almost as though the whole country took a little of the pain, jobs were there for people, but the wages were not great. But we are now seeing wage growth and we are also seeing productivity growth, which means that each worker is producing more, and interest rates will go up, this is likely to mean that soon it will be a good time for the economy, but a less good time for investors, who might have to get used to lower returns.
The way ahead
Against this economic scenario, the basic principles of sound investment remain constant. It pays to have a diversified portfolio with a mix of shares, bonds, property and cash, with a good market spread. Don’t be spooked by volatility and be realistic about expected returns. If it’s been a while since you last reviewed your portfolio, why not arrange to do so now?
It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation, are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency.