The arrival of spring is generally associated with a sense of optimism and, this year more than ever, we are all certainly in need of a positive boost. Thankfully for investors, there are increasingly hopeful signs on the horizon, with a growing belief that we are now at least starting on the road to economic recovery.
Reasons to be hopeful
The successful development and rapid rollout of COVID-19 vaccines has provided hope that we will soon be able to live with the virus. As well as protecting vaccinated individuals, there are encouraging signs that the immunisation programme will slow transmission in the community. This has raised hopes of a significant, vaccine- powered revival in economic activity later this year.
Rebound in global growth
This vaccine-fuelled optimism is reflected in recent economic forecasts; the International Monetary Fund’s latest projections suggest that the global economy is set to expand by 6% this year and 4.4% in 2022. For the UK, the IMF forecast growth of 5.3% this year, up from a previous forecast of 4.5% made in January, followed by growth of 5.1% in 2022.
A further boost to equity investments could stem from negative interest rates. Although it remains unclear whether such a policy will be introduced, back in February, the Bank of England gave banks and building societies six months to prepare for such a possibility. If enacted, sub-zero rates would further reduce the incentive to keep money in deposit accounts and thereby potentially increase demand for equities, placing greater emphasis on investment portfolios.
Spring clean your finances
Although the economic outlook is uncertain, there are positive signs for investors and the need to ensure your investment portfolio is working hard for you is more important than ever. Now could be the perfect time to review your portfolio and rebalance the allocation of asset classes, if necessary, to ensure your investments are well-diversified and performing in line with your long-term requirements and objectives.