An introduction from our Chief Investment Officer Michelle McGrade
Back in January when I introduced our Winter Outlook I said I expected that the markets would have more juice in them even after a stunning 2016, where the UK market rose over 17%. Since then global markets have risen over 6% in sterling terms.
Now I think markets could take a breather and tread water for the summer months, as they often do. I am sure you have heard the old saying “sell in May and go away”. What with Brexit dominating news and all the noise around it, it could well be healthy to pause for breath at this stage.
A lot of the Brexit noise can be explained by the fact that a) we are heading into unknown territory and b) it appears the Europeans are approaching our divorce settlement from an emotional point of view whereas Britain is very much focusing on the economics.
To my mind Europe has just as much to lose as the UK if negotiations break down. Europeans have yet to deal with the rising populism and social unrest in their union, and as the UK was/is the second biggest country within the EU our contribution will be sorely missed. I hope the negotiators put on their sensibility hats and work out a deal which works for both.
For UK companies, the story looks pretty rosy. It remains business as usual, and they are encouraged by a buoyant economic backdrop. Where I do have concerns is around the Donald Trump effect. So far he is struggling as a President. He stood for President as a businessman who can get things done, but to date he has disappointed. If he doesn’t start spending soon on infrastructure as promised the stock market could sour. We might start seeing a Trump Slump rather than the Trump Bump everyone is banking on.
Currently investor sentiment in the US market is strong and erring on Trump's side. However we will need to watch the US carefully as it has always been more influential for the UK market than anything else, including domestic issues.
In this Spring Investment Outlook we discuss Total Returns, providing a reminder about the differences between capital and income and how you can use both sources to increase your wealth. We also demonstrate the power of reinvesting dividends.
Then we take a deep dive into the financial sector. This is a sector which is not only diverse, as it includes banks, insurance, property and other financial services companies, but it is one of the largest sectors in our stock market and globally. We think the banking sector in particular is attractive for investors, especially as interest rates start rising.
I hope you enjoy reading our Investment Outlook and I urge you to keep calm during the summer months, particularly if there is lot of noise. It seems from our own research you know this already, however. In our recent online poll you told us the most important investment lesson you've ever learned was to focus on research, not panic, and be patient for the long term. Some of you said you don't listen to so called experts… for me its a great honour to be working with such savvy investors.
- Michelle McGrade, Chief Investment Officer, TD Direct Investing
The information we provide in this Investment Outlook are opinions provided by TD Direct Investing or one of its partners on whether to buy a specific investment. None of the opinions we provide are a personal recommendation, which means we have not assessed your investing knowledge and experience, your financial situation or your investment objectives.
Investors should be aware that with self select products or services the the value of investments can fall as well as rise unlike cash investments. You may get back less than you invested. Past performance is not a reliable indicator of future performance.
If you are unsure about the suitability of a particular investment you should speak to a suitably qualified financial adviser.