Jason Butler of NW Brown: Tumultuous 2017 proves fruitful for markets
PUBLISHED: 16:35 03 January 2018 | UPDATED: 16:40 03 January 2018
Jason Butler of NW Brown looks back at how equity markets performed in 2017, and what it could mean for 2018.
Despite heightened political risk, 2017 turned out to be a good year for equity markets.
This was in large part thanks to accommodative monetary policy and a supportive economic environment of low inflation and steady growth. There were a couple of key topics during the year.
In the UK, Theresa May managed to cling on to power having unexpectedly lost her parliamentary majority in June’s general election. Her authority, however, remains in doubt and this heightens the possibility that a resurgent Jeremy Corbyn will trigger a change of government and/or a shift towards policies that the market perceives as business-unfriendly and risky.
Central Bank policy also continued to greatly influence markets, as historically low interest rates and quantitative easing have pushed borrowing costs down and thereby promoted the further accumulation of debt.
According to the Institute of International Finance (IIF), global debt levels continued to rise in 2017 and total global debt has reached a record high of $217 trillion (327% of global GDP) compared to $149 trillion in 2007 (276% of GDP).
In contrast to uncertainties discussed above, there has been ample evidence that global growth is now at its strongest since the financial crisis of 2008 and that a prolonged but muted recovery is at last turning into synchronised global growth.
With this growth being neither too hot to cause excessive inflation, nor too cold to derail consumer spending and profit growth, investors are currently enjoying “Goldilocks” conditions, which has contributed to a strong year for equity markets.