Market Update: Outlook for 2016
Posted by Jason Chapman in Market commentaries category on 28 Jan 16
Despite steady economic growth in the UK last year, 2016 has started with a few bumps. Volatility in China has affected the stock market, while Chancellor George Osborne has warned of challenges ahead. Towards the end of 2015 the International Monetary Fund (IMF) lowered its global growth forecast for this year from 3.8% to 3.6% and managing director Christine Lagarde described economic prospects as “uneven”.
But what does this all mean to UK savers and investors like you? What is the general outlook on the year ahead and has people’s financial situation improved or worsened since this time last year? To answer these questions we commissioned a leading national polling firm to ask a representative sample of the UK population. What we found reflected the uncertainty being reported in the media, but promisingly, we unearthed a good degree of optimism too.
- Across the UK just under a third of people (32%) feel more confident about the economy than they did a year ago. This is slightly down from 37% who said the same in 2015.
- At the same time, 27% say they feel better off than 12 months ago – up from 26% in 2015
- An increase in inflation is seen as the biggest single threat to finances in 2016 – cited by nearly a quarter (23%) of people
When we look at the results by region, what really stands out is how much better off Londoners feel compared to much of the rest of the country (51%, compared to an aveage of 27%). Despite the higher cost of living in the capital, perhaps the clue lies in the ‘asset rich/cash poor’ tag you often hear about Londoners. With property prices showing no sign of letting up, many feel their finances are improving.
Inflation fell in 2015 which meant weekly shops are now cheaper, while the fall in oil prices also means less pain at the pump for motorists. Combine that with Government figures showing that wages are beginning to rise, and you can begin to see why the proportion of people feeling better off has crept up. It will be fascinating to see how sentiment evolves over the year as numerous potential economic and political dramas play out.
Threats and opportunities
Our research also asked people to name what they saw as the biggest potential threats and boosts to their finances in 2016. The results throw up some eye-opening comparisons. More people are concerned about the impact of a terrorist attack (15%) or the migrant crisis (18%) on their finances than a potential referendum on the UK’s membership of the EU (12%). Yes, those are both important issues, but when it comes to personal finances, a Brexit could fundamentally change the way Britons save and invest. The results suggest that impact is not yet understood by many across the UK.
The biggest potential boosts to finances in 2016 cited are a rise in interest rates, and wage increases (both 23%). Despite the plan for further austerity in the UK, both of these suggest an underlying long-term confidence in the UK economy. In comparison, only 3% of people believe that volatility in the stock market will be a boost to their finances. While this is understandable, it does suggest that many are still wary of playing the market successfully and knowing when is the appropriate time to take a risk in order to secure a decent return.
With so many moving parts to the economy, it means lots of things to think about when it comes to your investment activity. We know that decisions about portfolio allocation, or whether a new fund is right for you, are not taken lightly. As a result, it is helpful to test out different investment scenarios to get a sense of how things might look if you made changes to your portfolio.
That’s why we created Play Space
. It gives you a real investing experience, but without exposing your own money to the ups and downs of the investment markets. Play Space offers you the tools to build a virtual portfolio for you to manage and monitor its performance over time, until you’re ready to invest. Essentially, it’s a free way to practice your investing skills – which should help as you look ahead to the coming months.
Do you agree with our research findings? Post your thoughts below, and share what the recent market volatility means to you and whether it has affected your confidence in the markets.
Source: Opinium Research conducted an online survey between 18-21 December 2015, among 2,012 UK adults aged 18+. Results have been weighted to nationally representative criteria.