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Investment Market Update - Jan 2016

Investment Market Update

2016 has already had a somewhat eventful start for investment markets. To be fair many of the issues that are causing uncertainty are not new issues but the continuation of concerns that had already started to develop in the latter part of 2015.

Looking at the underlying reasons for the current volatility the primary cause has been concern that the Chinese economy has been moving into slowdown. This in turn has been exacerbated by the Chinese Central Bank further depreciating their currency, the reaction to which in China forced the closure of the domestic stock market following the triggering of what were known as ‘circuit breakers’. These were designed to calm down the market but in reality this has had exactly the opposite effect, until they were recently withdrawn.

At the same time that this has been occurring the price of Oil has also been falling sharply. This issue at first glance should be a positive one for consumers. The World has been swamped by an oversupply of oil caused by America’s development of shale gas, together with Saudi Arabia’s unwillingness to reduce Oil production. Indeed the recent warming of relations between America and Iran will also lead to an increase in Oil production.
Given the context of a lowering demand for Oil and the increased international supply it seems somewhat strange that Saudi Arabia are maintaining the existing levels of oil production, but at the heart of this are geo-political factors, as there appears to be a battle for regional influence and control.

All the above issues have a wider ripple effect such that as China has slowed and demand for natural resources has decreased so this has had a knock on effect felt in mining stock and emerging markets. A little closer to home we have witnessed the problems at Tata Steel where China’s policy of off-loading unwanted steel has had a real impact on even the more efficient steel production facilities such as Port Talbot in Wales.

Having noted all of the above however, periods of stock market volatility always create investment opportunities. In essence investors have the opportunity to purchase shares and companies at discounted rates. As fear and emotion always exaggerate movements in Stock Markets so it is possible to obtain real value.

Moreover, by many accounts there appears to be a gradual improvement in the global economic outlook over 2016. Cheaper Oil prices mean that business’s costs are reduced and this should lead through to increased profits for companies, which could in turn lead to dividend growth. Indeed in the UK employment has been steadily rising and wage growth re-appearing. The Banking system has also been much strengthened over the last 18 months and the Banks could step in to stimulate the economy if necessary.

If you would like help to seek out the growing investment opportunities and take advantage of the various tax efficient investment vehicles available to exploit these, as well as the changing taxation rules please contact either Shaun Bell or Stuart Read at Sabre Financial on 01548-856444 or via email at shaun@sabrefinancial.co.uk or stuart@sabrefinancial.co.uk

Please be mindful that everyone’s individual circumstances are different and the above article is simply general guidance as to market changes. You should seek appropriate advice about your personal situation before taking any action.

Sabre Financial is the trading title of Sabre Financial Planning Ltd. Sabre Financial Planning is authorised and regulated by the Financial Conduct Authority.

 

 

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