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The Investor January 2017
• 2016 is a strong year for investment performance, despite a few surprise bouts of market volatility
• The global economy improved as we approached year end, expect growth to gently accelerate in 2017. Inflation should remain reasonably low over the medium term but could temporarily climb to uncomfortable levels in 2017
• 2017 promises to be another year where risk assets (equities, corporate bonds, commercial property) can grind higher, outperforming cash deposits and government bonds
The Investor December 2016
The Investor January 2016
The Investor August 2015
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Last week we penned our thoughts on how the French Presidential Election might pan out. Overall we suggested that Marine Le Pen will need to see a significant increase in her vote and/or voter participation in the election would need to be quite low in order for her to emerge victorious. Still, given last year’s events and the growing likelihood Le Pen will qualify for the second round ‘run off’ vote for President, one can’t rule out the probability of a Le Pen victory.
With national elections scheduled in France, Germany, the Netherlands and possibly Italy in 2017, politics is never likely to be too far from the minds of investors in European assets in 2017. Below we provide a current update on the state of play on near term events in the Netherlands, France and Italy.
Last week was a busy one for central bank activity with the Fed, Bank of England and Bank of Japan all holding monetary policy meetings. None of the banks changed interest rates but that doesn't mean there was nothing for investors to digest.
Last night’s decision by the US Federal Reserve to raise interest rates by 0.25% was arguably the least interesting part of the FOMC meeting and press conference given it had been priced in as a virtual certainty by investors. The more interesting aspect was what happened the Fed’s ‘dot plot’ or members’ projections for changes in the Fed funds rate over the next few years.
This morning the Central Statistics Office (CSO) published the national accounts for Ireland for the third quarter of 2016. Overall they showed that real GDP and GNP grew by 4% and 3.2% respectively in the quarter meaning over the past twelve months they grew by 6.9% and 10.2% respectively (see table 1).
As you will all have heard by now Donald Trump is now US President Elect thanks to his unexpected win in yesterday’s election. So far the market reaction has been fairly predictable although conditions have improved a little compared to a couple of hours ago. Below I’ve provided a market update and our initial thoughts on the implications of the result.
At last night’s sideline OPEC meeting the cartel agreed a framework for cutting production in 2017. The production cut is the first since 2008 and could lower global supply by around 1 million barrels per day in 2017 and beyond. The specific country production quotas will be agreed at its November 30th meeting.
This week’s meetings of the Bank of Japan and the US Federal Reserve were always going to be closely watched following some investor jitters post the ECB meeting earlier this month where the Bank didn't extend its Quantitative Easing (QE) policy. Both meetings this week reinforced our long held view that we’re in a 'lower for longer' interest rate cycle and that even where there are rate hikes (such as in the US) they will be very gradual.
This morning the Central Statistics Office (CSO) released the Irish National Accounts for the second quarter of 2016. The accounts showed that real GDP and GNP both grew by 0.6% over the quarter. Over the past twelve months GDP and GNP grew by 4.1% and 4.6% (see table 1).
The role of absolute return funds in an investor’s portfolio should be to capture some market upside while protecting investors from episodes of significant downside. Contrary to popular belief, absolute return funds and even hedge funds are generally not designed to outperform in equity bull markets and are unlikely to do so.
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