Economic Outlook Newsletter Jan 2018
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:
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.
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