Your Q2 2018 outlook
See how growth, interest rates and inflation could have affected your money in Q2 2018
CAPTION: We’re seeing a mix of growth in the world economy, low inflation and low interest rates. But what does this mean for the financial markets, and our investments, over the next few months?
TREVOR GREETHAM: I’m Trevor Greetham, Head of Multi Asset for Royal London Asset Management and I’m going to be talking about the things to watch out for in the world economy that may be affecting the investment landscape.
One of the things we’re keeping an eye on in the next few months is the strengths of the world economy. At the moment we’re seeing strong profits growth in generally quite a supported back drop for stocks and the property market. It’s almost 9 years since the economy started to recover from the financial crisis back in 2009, and actually from April this year this is now the second longest business expansion, going all the way back to the 1850s. It’s longer now than the 1960s. The reason it’s been so long is inflation has stayed very low, and it may well mean this expansion trundles on, and perhaps even beats the 1990s.
The world economy is very strong. We’re seeing very high business confidence in America, where recently companies have seen tax cuts; we've seen the strongest growth in continental Europe we’ve seen in really 5 or 6 years; the UK is a bit weaker because of the Brexit uncertainty – we’re seeing growth here about half the level we would be expecting, but even so, it’s a good back drop for British companies, which make a lot of their profits overseas.
There’s a bit of concern at the moment because inflation is starting to creep higher around the world with the strong growth we’re currently seeing, and interest rates have started to rise here and there. That’s causing a bit more volatility in the stock markets. I think it’s a bit premature at the moment to worry too much about that, interest rates are still very low and we think there’s a possibility that the world economy will actually cool off again a little bit, in the second half of the year. We’re seeing some signs that the Chinese economy is starting to slow down, for example. So if you see a cooling off in growth in the world economy, actually it’s quite a good thing at the moment, because it means interest rates don’t have to go up that much further for the time being.
So, globally we’re seeing a lot of growth; that’s good for company earnings and it generally means that stock markets and property markets continue to do well. Relatively low inflation; we’re keeping an eye on that, low interest rates, and at the moment that’s quite a good back drop for financial markets.
The team here at Royal London will be keeping an eye on all of these things and will let you know how things are going in the next quarterly outlook.
CAPTION: If you’re unsure about your pension or investments, an impartial financial adviser can provide guidance based on your requirements.
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