Monthly Market Report - January 2017

6th January 2017

With commentary from David Stevenson

Who’d have thought that 2016 would be another impressive, banner year for equity investors? If I’d have sat down with said Mr Market on January 2nd2016 and told him that the UK was not far off voting to exit the EU, interest rates in the US would be expected to rise to 3% by 2018, Trump would be president and Italian PM Renzi would be out of a job, what do you think would have been an estimate for the direction of equity markets? My guess is that we’d be looking at projections of a rout, with falls of 10% or more than possible.  Instead the UK FTSE 100 is up over 18% in the year to date (December 15th) while the domestic focused FTSE 250 Mid Cap index is up 5.42% - the FTSE Small Cap index is up 12%. The S&P 500 index finished the year with an increase of 11.44% while Brent oil prices are up 42% year to date. If we were to project this bullishness forward into 2017, there’s no reason to believe that the FTSE 100 won’t test 7500 and the S&P blaze past 2500. Funds flow data also suggests that we are now seeing a more definitive flow out of bonds and cash and into equities, which only adds to the sense that the bulls are back in charge again.

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