ANOTHER BULLISH YEAR FOR INVESTORS?
The year 2017 was a remarkable one for investors. Markets shrugged off rising interest rates, political events, faltering Brexit negotiations and much more besides to end the year on an upbeat note, with strong growth sending equity prices higher.
Many predict further growth in equity markets around the world, though perhaps not to the same degree as in 2017. The European and Japanese markets are said to be in good shape, the Chinese economy is predicted to grow at around 6.8%, and the US looks set to start the year in a strong position. In the UK, the two major question marks over 2018 have to be the likely effects of the continuing negotiation and trade talks with the EU, and concerns as to how long the current government can remain in power with such a slim majority.
Although some experts believe that there could be a market correction at some point during the year, no one is currently predicting substantial downside risk. However, there are concerns that the expectations of some investors are becoming overly bullish.
A report from Schroders1 suggests that the majority of retail investors expect an annual return of 10.2% over the next five years, while institutional investors expect annual returns of just 5% during the same period. So, with international stock markets at or near all-time highs and potentially vulnerable to falls if bullish sentiment reverses, now may be a good time for investors to temper their expectations.
1 Schroders Global Investor Study 2017
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.