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Robert Vaudry 2018 Investments outlook

By Robert Vaudry, Investments MD

Robert Vaudry 2018 Investments outlook

Despite the ongoing political uncertainty that dominated the news agenda in 2017, smart investors can still make money in 2018, if they keep abreast of the changing financial landscape. 

Important changes in the markets

Emerging markets, and technology stocks in particular, performed exceptionally well last year. However, there's reason to believe their valuations over-shot and only modest returns will be seen in 2018.

For that reason, we're expecting a shift towards more traditional income-generating stocks, such as the financial, media, telecoms and utilities sectors, which will now have a further upside in 2018.

We also expect Japanese equity markets to perform well, driven mainly by a weak Yen against the US dollar and growth in continental Europe and USA markets (non-tech funds).
Property, especially prime industrial or retail sites, also remains a bright spot, despite the residential slump in London.

The Trump affect

The tax cuts recently passed in the US will be a major policy success for President Trump, particularly from an investments perspective. 

In the short term, these cuts will provide a major stimulus to the US economy. Economic growth will accelerate and more jobs will be created.

Add in the planned tax break on corporates being able to repatriate overseas assets and the large infrastructure plans, and the US economy will be booming.

Combined, we expect these changes to result in stock prices rising throughout 2018. However, the US will need to make sure that interest rates also rise to keep a check on the boom as inflation creeps higher.

In time, however, rising interest rates in the US will strengthen the US dollar, meaning US exports will become less competitive internationally.

The power of Brexit

Slow growth in continental Europe means stock markets here have tended to under-perform those in other geographical regions in recent years. Brexit, however, has changed this.

While the news agenda here has focused on the impact of Brexit on the UK, it's actually proved very beneficial for Europe. The EU has shown unity and remained focused, which has resulted in an uptick in growth forecasts for much of continental Europe and a rally in stock markets.

Aided by the election of President Macron in France, which has created a new sense that Europe can set a vision for the future, we expect this growth to continue throughout 2018.

Closer to home, the uncertainty around Brexit is set to continue in the UK. While the stock markets are expected to rise, they will do so at a slower pace than our international counterparts, which will undoubtedly impact GDP growth.

Investing in 2018

Overall, the main point for 2018 is that uncertainty will remain right up to the Brexit deadline, and businesses simply cannot function at their best in such an environment.

As a result, investors should consider capitalising on equities and property in 2018, where the direction of travel will continue upwards despite volatility.

In equities, investors might want to increase their exposure overseas, but not into emerging markets, while in stocks, they should focus on income-generating stocks rather than technology or growth stocks.

This article is intended to offer guidance only and does not constitute financial advice.

Please remember the value of investments and any income can go down as well as up and you may get back less than you invest.

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