2017 is proving to be just as unpredictable as 2016. Whilst terror attacks continue to make headlines around the world, North Korea and Donald Trump appear keen to engage in a dangerous game that may have dire consequences for everyone. And with recent elections in both the Netherlands and France that did not throw up too many surprises, our own Prime Minister did with an 8th June date for a general election – our second in two years.
So if we are going to the polls next month, what effect will that have on your own and your client’s personal finances? Obviously that depends on who wins the election and how you react to the prospect of further uncertainty and instability as we negotiate Brexit.
Our article on the election, also in this newsletter, covers the areas where we think there will be most contention –triple lock, pension tax relief, national insurance, state pension, ISA’s etc. Whatever the outcome, we recommend that people avoid panicking and any knee-jerk reactions. In our experience, investors who are able to ride out any short-term volatility are usually rewarded in the longer term.
Reasons for optimism
Many economists remain worried about 2017, as they predict an economic slowdown with high inflation, a squeeze on household spending and general caution fuelled by Brexit. However, there are some recent highlights which encourage more than a little amount of optimism:
- Continuing low unemployment
- UK manufacturing records fastest growth for three years
- Production of motor vehicles has also risen significantly
- Construction sector expands for the eighth consecutive month
- Housing market stabilises
- UK economy grew by 0.3% from January to March 2017 despite a slowing of the service sector
- Weaker sterling continues to increase the value of overseas earnings and helps to boost exports
- Lower than predicted public sector borrowing
- Interest rates remain low with many people sitting on cash waiting for a market fall to put their money to work, this is positive for shares
So with uncertainty still very much a permanent feature across UK and world markets, we advise our clients to be cool headed, pay down debt, save where relevant and invest wisely in things that you understand. Essentially having a well-diversified long term portfolio is key; as is not getting too hung up on predictions.