Sheltering from the VILE investment climate in 2017
Like buses, you wait for ages and then three come along at once. The first major shock of Leicester City winning the Premier League had little relevance for investors. But Britain voting to leave the European Union and the election of Donald Trump as US President proved to be game changing events for how we view the investment backdrop in 2017. Had we predicted all three events we could have turned £100 into £300 million (sadly we did not!).
Against a backdrop dominated by Brexit and ‘Trumponomics’ we believe that we are in for a ‘VILE’ investment climate in 2017. This is not as alarming as it sounds. It is an acronym for a year where we expect Volatile Inflation and Low Expansion.
Inflation is typically an indicator of economic and political instability. Brexit negotiations and the advent of Trumponomics will provide an elevated level of uncertainty in 2017. The weak pound will start to have an inflationary effect at home, whilst the rebound in commodity prices is likely to cause inflationary spikes across the globe.
We expect economic growth both at home and globally to remain at low levels. Economic growth in developed economies has been at low levels for longer than most people alive today can remember. Economies will remain heavily reliant on policies from Central Banks and Governments to support growth. Whilst we expect to see a focus on ‘pro-growth’ policies we do not expect that they will result in a significant short-term increase in global growth in 2017.
However, we do believe that fundamental changes in the political backdrop will alter the economic outlook and how an investment portfolio needs to be positioned going forward. Anyone positioning a portfolio based on past performance could be in for a tough time!