As we approach the end of 2015, which has turned out to be a fairly bumpy ride for investors, Leyton Hunt from Blackpool stockbrokers Hargreave Hale contemplates the outlook for global stockmarkets over the next year.
One of the key points likely to impact on equity market returns over the next year is central bank monetary policy.
In the US, the Federal Reserve announced the first change in interest rates since December 2008 – up by 0.25 per cent.
This should be seen as a positive signal for global equity markets as the uncertainty about the timing of the initial rate rise passes and provides some reassurance about the outlook for the world’s largest economy.
UK interest rates are expected to remain at record low levels for a slightly longer period of time and this should be a supportive environment for consumer spending, although disappointing for investors holding cash deposits.
Within the Eurozone, there is an expectation that the European Central Bank will expand its quantitative easing programme, which should support the major manufacturers that export out of the region.
There is generally a more positive feel about the UK economy, reflected in consumer spending, increased mortgage lending and stronger employment data.
At Hargreave Hale in Blackpool, we have reviewed our exposure to UK mid-cap companies, which have a greater focus on the domestic economy.
However, the Brexit Referendum is expected to be held towards the end of 2016, which could provide some uncertainty in the short-term.
Further afield, China has been one of the major areas of concern for investment markets over the last year, as it struggles to manage the process of transition from an economy driven largely by exports to one that is more focused on domestic consumption.
This has impacted commodity prices and a stabilisation in the economy would be welcomed by global markets.
On a more encouraging note, global merger and acquisition activity has been exceptionally strong during 2015 and this is generally viewed as a positive factor for equities.
Whilst we can expect to see further periods of market volatility during 2016, we believe that equities remain an attractive asset class for long-term investors both in terms of income yield and potential capital returns.