2017: Prepare for More Political Upheaval

The theme of politics driving markets is not one that is going to go away any time soon. Neither Brexit nor Trump have actually happened yet

External Writer 10 January, 2017 | 3:27PM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Anthony Willis, for F&C Multi-Manager, takes a look back at 2016 and provides an outlook on what could be in store for investors in the year ahead.

We witnessed a year of dramatic political events, where economic and corporate news was pushed down the headlines by politics and two significant events, the outcomes of which were not priced in to markets – the UK voting to leave the European Union, and Donald Trump winning the US presidential election. Despite these market shocks, equities managed to deliver positive returns, and for Sterling based investors relatively strong returns thanks to the fall in the currency as financial markets digested the prospects for the UK outside of the EU.

The central banks continued to be a key player in financial markets and the European Central Bank, Bank of Japan and the Bank of England all loosened monetary policy over the course of the year. Financial markets were expected to suffer steep falls and volatility in the event of Brexit or a Trump win – in both cases we saw a sharp initial selloff but an equally rapid rebound. Much like the opinion polls called the outcome incorrectly, those predicting the fallout in financial markets were equally humbled.

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