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Market Update

November 2016 UPDATE

Positive UK economic data despite a decline in share prices

In November, UK investors were in less optimistic mood than in the preceding months. Share prices declined, with the index of the UK’s largest companies closing down by just over 2%.

Despite investors’ apparent concerns about the UK’s prospects, economic data proved broadly positive. The EU referendum result has done little to dampen consumer spending; retail sales rose by 7.4% in the year to October. However, business surveys suggest that some firms are postponing spending, at least until the UK’s future relationship with the EU is clarified.

Philip Hammond, the new Chancellor of the Exchequer, delivered his first Autumn Statement. Much of the focus was on the accompanying economic forecasts supplied by the Office for Budget Responsibility (OBR), which provides independent forecasts to the government. The OBR predicts that the UK economy will grow by 1.4% in 2017 and 1.7% in 2018, which is slightly worse than its pre-EU referendum forecasts.

Donald Trump’s unexpected win in the US presidential election initially created uncertainty in global financial markets, with investors seeking ‘safe-haven’ assets such as government bonds and gold. However, US equities soon reversed direction, reaching a series of record highs towards the end of the month. At one point, all four of the major US equity indices reached new peaks – the first time this has happened since the middle of the 1990s dotcom boom.

In the bond markets, investors’ immediate reaction to Mr Trump’s election victory was to buy government bonds, causing yields to plunge. This move was swiftly reversed however, as investors sold bonds in favour of US equities. UK and German government bonds followed the US lead and fell in value. This led to a rise in yields, which move in the opposite direction to prices.

The UK commercial property market managed to edge ahead, representing the first monthly rise since the UK voted to leave the EU in June. However, the office sector hit the headlines after research from BNP Paribas Real Estate revealed that over 2.1 million square feet of office space is currently on the market for subleasing as businesses try to reduce their London floor space.

Should I make any changes to my investments?

Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.

One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes take a look at our An introduction to diversification in multi-asset funds guide.

Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, you can find one local to you by visiting find a financial adviser, which is responsible for promoting financial advice in the UK.

All figures quoted are in sterling terms to 30 November 2016 unless otherwise stated.

Investment markets and conditions can change rapidly and, as such, the views expressed in this update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, cannot be guaranteed and should not be relied on when making investment decisions.

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