What's Happening in the World of Personal Finance?
Outlook for 2017
Last year was a dramatic one, with the UK voting to leave the EU and Donald Trump becoming the unlikeliest President in living memory. Whatever follows in the rest of 2017, even post Article 50 being triggered, will seem pale in comparison.
Over the year to March 2017, the broader UK market increased by 18%, with nearly all of this coming after the Referendum result. Market volatility is expected to continue for the remainder of this year with further modest growth expected, possibly as low as 2%, with both unemployment and wage growth continuing at sub 5%. Inflation should continue above the target level of 2%, but the scope for Bank Base rate increases is limited.
The level of economic growth in the US is expected to continue in modest form despite some signals given by President Trump. A learning process is underway and pitching in with some easier wins, such as serious infrastructure spending projects which would certainly provide a boost to both growth and jobs. The US dollar is fully valued and with steady growth continuing, further small increases bank base rate rises have already been flagged up for across the year.
Whilst there may be opportunities for investment appreciation in Europe, there are elections coming up within key EU members this year. Terrorist attacks have created a climate which fuels growth for the more right leaning populist parties. Growth overall is forecast at 1.5% and inflation is muted. The dialogue on Brexit continues to provide much posturing by both parties. It is a curious and at times comical performance, since they are each acutely aware that no deal or a poor deal leaves both parties at an economic disadvantage.
Japan, as Europe, is now in the middle of a quantitative easing cycle and initiatives put in place by Prime Minister Abbe have not as yet produced any lasting results. With inflation at almost zero and GDP forecast to be just 1.0%, further work is required.
In the emerging countries, most notably in China, the slowdown is having an impact on commodity markets, basic industries and trade volumes with growth for China of around 5% expected this year. They are all awaiting the west, principally the USA, to generate more normal growth levels to lift this position.
With the interest rate cycle at a turning point caution is required with fixed interest and many available funds are showing a preference for credit risk rather than interest rate risk. There are several equity funds that provide income comparable with and in excess of that offered by fixed interest funds at this time.
The ISA allowance has been increased form £15,240 to £20,000 for tax year 2017/18, which is a welcome boost and provides a great opportunity to boost tax efficient savings. The restriction on the amount held within the cash component has been removed completely and there is also the ability to withdraw funds contributed in the current tax and replace them in the same tax year, giving greater flexibility. The move to allow ISA allowances to be transferred to a surviving spouse is also available to help mitigate tax.