2018…..growth is the forecast!

With 2017 now behind us, there is much to consider in the financial planning world for 2018. The Chancellor's Budget in late November 2017, which was a little bit of a surprise announcement because he had indicated he was not having one the year before, saw very minor changes to pensions or investments. Don't forget that there is a Spring Statement from the Chancellor planned for 13 March 2018.

Brexit will of course be a significant feature of 2018 and its outcomes at the time of writing are not clear. However, from an investment perspective, global growth continues to be buoyant and the International Monetary Fund (IMF) as an example projects global growth to be 3.7% in 2018. This is not guaranteed of course and will be reviewed regularly throughout the year, but remains positive none the less. More details on the IMF's view for 2018 and beyond in their World Economic Outlook document can be found here: https://www.imf.org/en/Publications/WEO/Issues/2017/09/19/world-economic-outlook-october-2017

We have also noted that we believe that the end of 2017 was a turning point in the cycle of low inflation and interest rates, as both indices start to trend up, both in the UK and abroad. This may eventually lead to changing economic patterns…but when did money and finance ever stand still? We noted in 2017 that some pundits have suggested that there will be a global switch from monetary policy to fiscal policy. A definition of each is as follows:

  • Monetary policy is the process by which the monetary authority of a country, like the central bank or currency board, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
  • Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy through which a central bank influences a nation's money supply.

One major global focus for 2018, possibly not on everyone's immediate scope at this point, will be the United States Mid-Term Elections in both houses in November 2018 which may have a significant impact on the governance of America into the near future, and it will be interesting to see if the corporate tax cuts recently agreed and ratified will see this significant economy evolve and change voting views by that time.

In recent years we have remained keen on investment / pension allocations to the UK, North America, sterling and dollars, with a lower positive view / allocations towards Europe. We have started a process of evolving this view, with an increased allocation being focussed on European funds, whilst at the same time taking a more cautious approach with regards to allocations to commercial property. This house view has in part been informed through our in-house investment committee and I have detailed this further below. At regular reviews with our clients for their portfolios, pensions and ISAs where appropriate we have considered these allocation updates accordingly.

As we have maintained before, in our view, 2020-2021 looks interesting and potentially a time of (or the lead into a time of) further change, although probably not before then. Indeed, with this in mind, we think that from a growth perspective the next few years look good, if not strong. This is not guaranteed and is only an opinion, and probably not one that will be shared by the press any time soon.

Chapters Financial Investment Committee

It is important that all directors and advisory team members are briefed and updated on the current economic climate and its data in order to inform our 'house view'. We aim to meet once a quarter and to ensure our process remains robust, we also use the services of an external consultant, Steve Williams of Cormorant Capital Strategies. For information, their website can be found here: http://www.cormorantcapitalstrategies.co.uk/

Steve Williams produces a regular Macro Economic Review document and, with his kind permission, this is reproduced here. We aim to update this once a month. We find this update helpful in considering the current economic conditions.

No individual advice is provided during the course of this article and please remember that we can be wrong, like many others are and will be. However, have a look at some of the stats and timings that are freely available and, as we have, bring these together. The story outcome is potentially positive; it's just the way you read it!

Keith Churchouse FPFS


CFP Chartered FCSI

Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.