Economic Outlook Newsletter Jan 2018
Irish Medical Organisation

Economic Outlook Newsletter Jan 2018

Dear Member,

Welcome to the first edition of our 2018 newsletter.

2017 was a stellar year for equities. Despite lukewarm predictions by many strategists at the beginning of the year on the back of political concerns, equities were supported by good economic growth data, continued strong corporate earnings, low interest rates and subdued inflation. The prospect of US corporate tax cuts also helped.

The predominant factor that affected eurozone investors during 2017 was the strength of the euro currency and the break-out on the upside of the euro dollar rate from its long-term trading range (1.05 -1.15). The rate now sits at 1.20. The euro’s strength during 2017, a rise of c.14% against the US dollar, was due to good eurozone economic data and plans by the ECB to taper ‘quantitative easing’ in 2018.

Market participants continue to assess the pace of interest rate rises in the US – December saw the fifth rate rise (of 0.25%) in the cycle albeit from historically low levels of effectively zero percent. The Federal Reserve has forecast three further rate hikes in 2018 due to the strengthening of the labour market and economic activity.

Equities remain reasonably well valued on a relative basis compared to bonds and cash, although they have become more expensive on an absolute (P/E ratio) basis. Greater volatility is expected in 2018. Eurozone government bonds continue to offer little long-term value.

Choosing a fund or funds to sail you through these events is a tall order. With literally hundreds of funds to choose from, where to start is a daunting task. Therefore, IMO Financial Services has engaged an external investment consultancy firm, Clarus Investment Solutions, to provide independent and specialised investment support. We asked Clarus to carry out an assessment of funds offered by the six domestic life companies and to produce a set of preferred funds across four different risk bands.

In total, Clarus surveyed 130 funds in the following categories:


-Absolute Return

-Global Equities


Funds were ranked using a bespoke scoring system which takes account of 20 criteria such as charges, returns, volatility and diversification.

This advice combined with an annual review of your portfolios is a New Year’s resolution you should adopt. Whether you are the frugal saver or an avid investor, saving money for a rainy day or for your silver surfing retirement, keeping abreast of your savings performance and what affects it, is vital.

We thank you for your support and business in 2017, and indeed over the last 25 years. We look forward to meeting with you in 2018, to continue to work closely with you to provide positive outcomes and to help you meet your investment objectives.

Best wishes

Francis McGrath QFA RPA

Warning: Past performance is not a reliable guide to future performance. The material in this email is not intended to provide advice and is provided for general information purposes only.

Fitzserv Consultants Ltd. t/a IMO Financial Services is regulated by the Central Bank of Ireland

Market Commentary

Equity Markets

World equities (in euro terms) gave a total return of 9.0% for the year as a whole.

Local currency returns, in general, were much stronger for 2017 with the leading markets being Hong Kong (+36.0%), Japan (+19.7%) and the US (+19.4%). After a strong run, European equities saw some profit-taking towards the end of the year and finished up 10.1%. The best performing sectors in the US in 2017 were technology (+36.9%) and basic materials (+21.4%). 

Bonds & Interest Rates

The Merrill Lynch over Five Year Euro Government Bond Index was up marginally for the year. Bond prices held up reasonably well in 2017, following sharp declines in in the second half of 2016, helped by muted eurozone inflation and ongoing quantitative easing. 

The German ten-year bond yield rose during December from 0.37% to 0.43%. Equivalent US rates were unchanged at 2.41% having begun the year at 2.44%

Despite the Federal Reserve’s forecast of three rate rises (of 0.25%) in 2018, the markets are currently only expecting one or two. Eurozone rates are likely to remain at current ultra-low levels for at least 12 months. The Bank of England increased rates, at the start of November, for the first time in a decade by 0.25% to 0.5%, reversing emergency action following the Brexit vote. One further rate rise is forecast for 2018. 

Commodities & Currencies

Commodity prices generally tend to rise as economic growth expands. During 2017, a number of commodity prices have shown strong positive returns in US dollar terms including copper, gold and oil. The overall commodity index is only up 0.7% for the year, held back by weakness in soft commodities (e.g. sugar, coffee and cocoa) as well as grains. 

Oil had been adversely affected up until the end of August by an increase in shale oil production and disappointment over the scale of OPEC’s production cuts. The oil price rebounded sharply in in the latter months of 2017 due to stronger demand. The gold price rose by 2.8% during December to $1,309 per troy ounce and is up by 13.7% for the full year. The copper price rose by 8.7% during December and is up by almost 32% for 2017. 

(Source: Zurich monthly investment review, January 2018)




The Irish Economy: Strong tail winds with some head winds

Jim Power, chief economist at Friends First, anticipates that real GDP could expand by 4% in 2018, slightly ahead of the Government GDP forecast of 3.5%. 

The momentum in the Irish economy is strong and prospects for the coming year look promising and are boosted by strong tail winds from global economic improvements. However, the uncertainty pertaining to external factors such as Brexit negotiations as well as global corporation tax developments present potential challenges to the Irish economy over the next 12 months. With a forecasted rise in house prices of up to 15% in 2018, an increase in housing supply is identified as a critical issue that must be addressed to safeguard from a surge in debt levels, which could threaten overall economic stability.

His report shows solid, broadly based growth momentum in the Irish economy during 2017. Consumer spending is noted to be improving with relatively high consumer confidence year-to-date, which has been supported by employment growth of 2.9%; average wage growth of around 4%; a modest easing of the tax burden; and growth of around 6% in personal disposable incomes.

Despite the recovery, the challenges facing Ireland in 2018 are clearly defined in the report. The principal factors include:

  • > a chronic lack of housing
  • > under-funded and inefficient public services
  • > managing the balance between public expenditure and taxation
  • > growing wage and other business cost pressures
  • > and, of course, Brexit.

(Source: Friends First Economic Outlook 2018)

Invalidity Pension now extended to the self-employed

Invalidity Pension now extended to the self-employed

From 1st December 2017, the Minister for Employment Affairs and Social Protection, Regina Doherty, extended the Invalidity Pension Scheme to self-employed workers for the first time. 

It means that people who work for themselves and pay PRSI at Class S have the option of applying for Invalidity Pension on a similar basis to those who are employees. Invalidity Pension is a pension payment for people who cannot work because of a long-term illness or disability. For the first time, the self-employed will have access to the safety-net of state income supports if they have a serious illness or injury that prevents them from working without having to go through a means test.

To qualify for an Invalidity Pension from the Department of Employment Affairs and Social Protection, a self-employed must have:

  • > 260 PRSI paid contributions (Class A, E, H or S) since they started paying social insurance and
  • > 48 PRSI paid or credited contributions (Class A, E, H or S) in the last complete contribution year or the second last contribution year before the date of their claim.

To that effect, we recommend that you review your income protection cover to ensure that you are not over-insured. If you wish to make an appointment for a review, please contact us on


Warning: Past performance is not a reliable guide to future performance. The material in this email is not intended to provide advice and is provided for general information purposes only.


Fitzserv Consultants Ltd. t/a IMO Financial Services is regulated by the Central Bank of Ireland




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