End of Year Review

Although we can expect to see continuing volatility as the death throes of the Trump administration work their way through the system and a Brexit deal or no deal is agreed or not, there is light at the end of the tunnel and we end 2020 with a sense of optimism and hope for better times to come. The vaccine or a number of vaccines are being rolled out and are broadly welcomed as the route to step away from lockdowns and economic and social restrictions to a new normality. It is suggested by some commentators that pent up demand and synchronised global growth could see global GDP fully recovered by the third quarter 2021 which is a pretty bullish view.

The Brexit deal or no deal is still to be sorted but the difference in outcome in overall terms is not that great, certainly in global terms. If there is no deal sterling will decline but that will help overseas earnings and therefore those shares exposed to that. The UK has been the world’s most unloved market for some time but now there is evidence that outside investors are seeing through all the smoke and noise of Brexit arguments and are beginning to consider the UK as offering one of the best opportunities, as we enter the post Covid phase. There will be a move away from defensive stocks into growth assets and this should also benefit Emerging Markets which tend to be dollar denominated.

There is likely to be a tick up in inflation over the next eighteen months or so but interest rates will stay low and this inflationary rise should be short lived. The prospect of negative interest rates has diminished but rates are expected to stay low for the foreseeable future.

Despite all this, portfolios have held up well and the best way to both grow and preserve wealth is through a broadly based portfolio of equities and fixed interest securities, with the split dependent on your attitude to investment risk. There will be volatility but if the long term investment goal remains, you should not be overly influenced by short term issues, however tempting.

As always, if you would like to speak to us about any of the above or would like further help or advice, then please do not hesitate to get in touch with your usual Lycetts contact – telephone 0845 671 8999 or email.