Investors could be forgiven for thinking there is nothing else markets can throw at them after a remarkably eventful year.
What started with concerns about Chinese growth and US Federal Reserve interest rate rises soon morphed into issues from other corners. The price of oil tumbled in January and February to below $30 (£24) a barrel before rallying to a more sustainable range of close to $50. In turn, this has helped support emerging markets in recent months, which have seen a boost in terms of equity performance.
Data from FE Analytics shows the MSCI Emerging Markets index has gained 36.8 per cent for the year to date to November 7 in sterling terms. This compares favourably with the first two months of the year when oil prices reached new lows – the index recorded a fall of 1.3 per cent for the two months to February 29.
This rebound for emerging markets, however, has coincided with a reversal of fortunes for other regions. The UK, for example, has wavered in the wake of the unexpected EU referendum result, though the FTSE All-Share index has recorded a healthy 11 per cent gain for the year to date to November 7. Meanwhile, the MSCI AC Europe index has only sterling weakness to thank for its 14.7 per cent rise.
As the after-effects of the Brexit decision start to be felt, the recent High Court judgement stating Parliament should be given the opportunity to vote on the triggering of Article 50 means the process of leaving the EU – originally set to begin in March 2017 – could now be subject to further delays. While the weaker pound is helping UK stockmarkets weather the uncertainty, the benefits of a lower currency cannot last forever.
Meanwhile, one of the most divisive US presidential campaigns on record has reached its conclusion. What once seemed a clear-cut result became much closer than many expected. Donald Trump’s victory surprised pollsters and markets, and the consequences are likely to spread further than just the US. Moves by the US Federal Reserve will be watched closely and the impact on regional markets and monetary policy interpreted accordingly.
Japan and Europe have both adopted negative interest rate policies, and the next few months could determine the future of this strategy. Will they be reversed, or will they remain a template for other countries seeking further monetary policy options?
For investors, the unprecedented macroeconomic and geopolitical events this year have made diversification and a global outlook essential in finding the best income streams and investment returns. Far from ending the year with more clarity, uncertainty continues to grow. Investors need to be prepared to take advantage of all the global opportunities they can.
Nyree Stewart is features editor at Investment Adviser
