8th January 2018

What investment trends should we expect in 2018?

by Huddle Capital

With 2018 now in full swing, it is the ideal time for a fresh perspective on what this means for your money and investments, this coming year. Exploration of key investment predictions and themes will allow for the reevaluation of the overall investment portfolio and the potential to shift and amend funds appropriately. With the first Thursday of 2018 passing and marking the time in the year when the average FTSE CEO will have already been paid the equivalent of the average take-home salary of a UK worker. In the past year, company boards have demonstrated modest restraint concerning pay fall for CEO’s. However, the pay gap is still wide, and for many non-executive workers, this can spike interest in making their money work harder for them.

How did the UK fare in 2017?

According to several industry professionals, 2017 was a surprisingly solid year for investment, and the UK appeared to fare well, particularly in the face of several distinct factors, including;

  • Ongoing and slow progress with Brexit negotiations
  • Hung Parliament for the voting result
  • The new Trump government in the US
  • Several elections across Europe

Perhaps, surprisingly, reports confirm that the FTSE All-Share index noted the UK return on investment, including dividends, was in line with the Global markets (at 12.3%). For UK investors, Asia and emerging markets achieved the best results for investors (both with a return of +25%), with Europe and Japan following with definite positive gains (+16%) reported by the stock exchange.

Interestingly, The OECD (Organisation for European Cooperation and Development) saw a boost in economic growth, for the first time in ten years, due to the advances in Equity Markets. Typically the big US five FAANG have, again, been undoubted leaders in the growth stocks field. However, it has overall been a positive year across the globe, during 2017.

What key themes should investors look out for in 2018?

Technology advances

A recent feature in Forbes, by Michael Foster, described the last year ‘If we look at the stock market on a sector-by-sector basis, we see that tech is the clear winner’ in terms of investment, for 2017.

Digitisation and the subsequent technology, including an increased number of companies implementing artificial intelligence and automation, continues to push to the top of the growth scale. These advances aim to provide customers with improved efficiency, optimised experiences with brands and most importantly, security systems built on the learnings from highly publicised data breaches. It is important for anyone considering investing both their time and capital, in 2018, to thoroughly research any new industries that they’re considering branching into.

FAANG Vs. Value Stocks

Even though the big US giants; Facebook, Apple, Amazon, Netflix and Google have performed well in the past year, economists are suggesting that cheaper ‘value stocks’ could make a comeback, when considering their re-emergence at the tail end of 2017.

Furthermore, it has been highlighted that an ‘investment bubble’ may exist, suggesting that all five companies within FAANG, who have enjoyed considerably strong growth, could now be overvalued. This could result in several big investors exiting and selling their stocks whilst prices are high, causing a potential market downturn.

Recent reports suggest that due to around £50b of capital pumped into ETFs (Exchange Traded Funds) during 2017, they may find themselves becoming compliant and lazy. With so many investors holding an investment in the same, steeply priced stocks, there could be significant consequences, should a market downturn occur.

James Clunie explained; ‘We have seen nascent signs of a reversal of this pattern, which could be important because a stock market rotation out of growth into value is something that has been witnessed in the run-up to a number of financial downturns.’

When looking into the future of 2018, it has been stated by a number of investment specialists that ‘the party has to end soon’, meaning that investment decisions will now need to be based on even more precise analysis, complemented by a highly disciplined decision process.

Property investment

According to Seven CIO, Alex Scott, mainstream investments in property and bonds will likely slow down in 2018, particularly so in the London property market. With this shift, investors are likely to seek out alternatives to traditional asset investments, which could move interests towards industries such as P2P or P2B lending.

Alternatively, property investors may look outside of London, with the popularity of property purchasing in the North gaining traction. Halifax MD, Russel Gallet notes that “UK house prices, in general, are likely to be supported, seeing modest growth in 2018, through the combination of a shortage of properties for sale, continued low levels of housebuilding, low unemployment levels and finally good levels of affordability due to the low interest rate environment.”

What is the outlook for 2018?

When we consider the huge changes that occurred and are still occurring, in 2017 through to 2018, it could be considered highly impressive that the previous year proved to be considerably placid. Many industry experts have predicted that 2018 could fail to follow such a straight line. Head of sustainable investment at Liontrust, Peter Michaelis, advises that volatility could be higher in terms of shares and corporate bonds this year, particularly, if interest rates rise rapidly. Therefore, it is advised that everyone should reevaluate, prepare, analyse and make educated investments accordingly in 2018.

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