Research has proven that investing sustainably doesn’t necessarily impair returns at all – and may in fact be key to achieving good performance in a rapidly changing world.
As the sun sets on 2014, our wealth managers look ahead to investing in 2015. As we approach the end of this year and look forward to investing in 2015 here are some interesting views and ideas from some wealth managers on our panel – and we add a few candid observations of our own.
Whilst 2014 has been generally positive for financial markets, the increase in volatility has presented increased challenges. Major stock markets have performed well in general, with the occasional correction supplied by geopolitical concerns on the Russian and Ukrainian borders and the Middle East.
Economically, the debate around inflation or deflation roars on and, with this in mind, commodity markets have shown a mixed performance. The oil price, hitting new multi-year lows on a regular basis, points to further deflationary pressures building – especially with OPEC having said it would be willing to withstand a drop in the price of crude to $40 per barrel before contemplating the need for an emergency meeting. In response, Thomas Pinkerton, Chief Investment Officer at Falcon Private Wealth, suggests that “the oil price is clearly a bonus for some industries and oil-consuming countries, and it is a boost to the likelihood of expanding consumer demand”. He goes on to say that, conversely, “it does lead to a point of increasing tension for the oil-producing nations and increases geopolitical risk”.
Precious metals prices remain subdued and there has also been the recent “Save our Swiss Gold” initiative – a referendum in Switzerland intended to ensure that the Swiss National Bank does not sell any more of its gold reserves and that all reserves remain held in Switzerland. These two points coupled with the need to buy gold in the open market to maintain gold reserves above 20% kept the price from dropping lower. However, with Swiss voters rejecting the proposition, gold has continued its run of lackluster performance as no fresh buyers have emerged.
US market analysts continue to raise their growth estimates after a series of impressive quarterly earnings. Although the US economy appears to be on the road to recovery, the pace is slowing with consuming spending struggling and wage growth weak, as is also the case in the UK. As StJohn Gardner, Head of Investment Management at Arbuthnot Latham, says: “This perhaps explains the reticence of the US Federal Reserve and UK Monetary Policy Committee to put up interest rates until firm inflationary and growth trends are evident; instead, we can expect ongoing careful adjustments in the pace of monetary normalisation in line with economic recovery. Thus far they are doing an excellent job, but the scope for getting the timing of rate rises wrong remains significant and one should continue to expect resultant volatility in asset prices”.
Summarising the past year in his firm’s monthly publication, View from Psigma, Thomas Beckett, Chief Investment Officer, notes that, “2014 felt like it has been a bruising encounter”, but he is happy to report that “many of the wounds have healed in global financial markets over the last few months”. That said, the current signs of the “Santa Rally” often evident in equity markets at this time of year do seem largely absent.
The outlook for next year looks murky and challenging; with so many potential economic headwinds, it is a brave soul who would not wish to remain flexible in the face of these stormy conditions.
Thomas Beckett at Psigma goes on to say that he “expects best returns for the new year to emerge in markets where there is a still a large amount of scepticism but also where the economic recoveries are still in their early stages”. Chief amongst these “hope trades” he feels are assets in Europe and companies in Japan, which he thinks will be the regions where the central bankers will be most active.
The need to protect assets and have your money managed effectively has never been more clear, especially since the polarisation of markets seen in 2014 is a trend likely to continue into next year. As a starting point, it would be prudent to be increasingly selective about your investments, both by region and sector, although there are many other strategies you might like to consider to make your wealth work harder in 2015, while still keeping a keen eye on managing risk. There may be bumps in the road ahead, but findaWEALTHMANAGER.com can introduce you to specialists that can help you manage your money so you can sleep better at night – whatever the new year brings.