Surprise followed by uncertainty

“Hold on! If 2016 has been the year of surprises, 

2017 may be the year of uncertainty”

2016 has been the year of big surprises. Leicester City won the Premier League, the UK voted to leave the EU, and Donald Trump was elected next President of the United States. If you predicted all three, you were one of a rare few!

Looking back on 2016

The world of personal finance has also witnessed significant change. Here are five changes of note from the past 12 months… besides Leicester City, Brexit and Trump:

 
  • Changes to state pension age: the government launched an independent review of the state pension age. The long-standing ages of 60 for women and 65 for men were set in the 1940s. Finding a recommendation that works for everyone will be a tough challenge.
  • Changes to interest rates: after 88 months of no change, the Bank of England cut its base rate from 0.5% to 0.25% in August. A move in this direction is traditionally seen as good news for borrowers, but bad news for savers. Many expect the recent fall in the value of the pound to drive a rise in inflation. We’ll watch with interest to see how the Bank of England responds. 
  • Changes to the FTSE 100: at the time of writing, the FTSE 100 had risen by more than 10% since the beginning of the year . This is a strong performance, but political events and uncertainties about the world economy have all contributed towards significant volatility through this period. It will be a brave person who predicts with confidence where the next 12 months will take us. One thing we can state with certainty is that past performance should not be taken as a guide to the future.
  • Changes to life expectancy: life expectancy at birth for a boy in the UK is now 79.1 years and for a girl is 82.8 years.  Male life expectancy has increased by 8.3 years between the years 1980–1982 and 2013–2015, with female life expectancy increasing by 6.0 years over the same time period. The latest figures, however, reported no change on the previous year, due to an increase in deaths in 2015. Regardless, the general trend continues to be upwards, across all nations of the UK.
  • Changes to autumn statements: in November, the new Chancellor of the Exchequer, Phillip Hammond, delivered his first, and last, autumn statement. He announced that the recent tradition of a Spring Budget and Autumn Statement would end, to be replaced with one all-encompassing annual Budget from Autumn 2017. To transition to this new regime, however, we’ll enjoy two budgets next year – one in Spring and another in Autumn. Twice the fun?
 

Looking forward to 2017

2017 looks set to be no less ‘exciting’. Here are five dates of significance for your diary. We’ve focused on the first half of the year – at times like these, looking beyond six months is a tough challenge!

  • 20 January: Donald Trump will be inaugurated as the 45th President of the United States. Will his presidential policy echo his campaigning rhetoric?
  • 31 March: by this date the British government aims to have invoked (the now famous) Article 50 of the European Process, marking the beginning of the UK’s exit from the EU. Will it be a soft or hard Brexit, or something in between?
  • 6 April: this date marks the beginning of the new tax year, and the date when the new Lifetime ISA product will come to the market. The new savings product is designed to help under-40s save for their first property or retirement. Will this help reverse the decline in home ownership amongst the young?
  • 23 April: France goes to the polls. Will the political upsets of 2016 continue into 2017?
  • 7 May: by this date, the government will publish its independent review into the future of the state pension age. Will we be expected to work into our 70s?

Investing in uncertain times

We certainly live in uncertain times. Few of us like uncertainty – individuals, businesses or financial markets. The team at Aviva Investors has been looking at the way some of the year’s most significant events might lead to uncertainty in the world of investment. They’ve concentrated on three key topics and how investors might react to them: 

  • Geopolitical uncertainty: the importance of a broad portfolio of assets at times of global political uncertainty.
  • Chinese uncertainty: the potential implications for your investments as Chinese growth slows to more sustainable levels.
  • Inflation uncertainty: the challenges of investing at a time of predicted price rises in the UK and continual low inflation overseas.

 

Aviva Investors can help you gather your thoughts as you consider how to navigate your investments in changing times. It’s well worth having a look...

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AR01843   12/2016

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