Looking forward in 2019

2019 has arrived, and it’s time to start looking at what it might mean for your finances. But as a look back to 2018 will demonstrate, predicting the future can be almost impossible.

This time last year, economic growth was weak, following the slowdowns of 2017 and ongoing bad weather. Very few were predicting a FTSE that hit record levels, a cut in government borrowing and a boost in employment figures.

In fact, during 2018 the UK economy not only grew, it was at last able to achieve the performance it had before the financial crisis. At the end of the year, we as a nation were considerably better off than many had predicted at the beginning.

But if 2018 was full of surprises, not all of them were good.

The British economy grew – but not as fast as many others in Europe. It was of course the Brexit uncertainties that put the brakes on. While a weak Pound boosted exports, a lack of confidence may have prevented many businesses from making the investments they needed to grow.

Brexit worries intensified as the year wore on, leaving us in limbo. But we were not alone in facing global and political challenges.  President Trump started a trade war with China and skirmishes with Mexico, Canada and the EU. In Europe, Angela Merkel began the process of stepping down, Emmanuel Macron’s policies have led to fighting in the streets of France, and Italy’s coalition seems set on creating turmoil.

Uncertainties seem to be increasing – and markets and businesses do not like uncertainty.

What does this tell us about 2019?

It looks as though the Brexit indecision which put the brakes on UK growth in 2018 will still be a drag on the economy at the beginning of 2019.

At the moment, there seem to be at least five possibilities for dealings with Europe. Soft Brexit under Mrs May’s proposed agreement, ‘hard Brexit’, or even a second referendum, possibly leading to ‘no Brexit’ or a European Economic Area-plus ‘Norway-style’ deal.

All of these have different implications for 2019 and beyond, but whatever the final arrangements, the sooner they are known the better. The preferred Brexit option is to ensure the closest possible trading relationship with the European Union and easy access for financial services to overseas markets. If there is a relatively smooth exit the Organisation for Economic Co-operation and Development – OECD – has predicted that UK economic growth should pick up this year before slowing in line with global trends in 2020.

Without a negotiated exit, uncertainties may continue, although many in the Leave camp remain confident that the UK will be ready to do business with the rest of the world.

What about the global economy?

The OECD believes that the recovery from the crisis and the global expansion that went with it has peaked. Global GDP growth is projected to ease from 3.7% in 2018 to around 3.5% in 2019. This reflects usual global growth figures, but takes into account trade tensions, Quantitative Easing finally being replaced by Quantitative Tightening in the US, protectionism and higher oil prices.

What should you do?

As 2018 proved, even the most experienced financial observers are unable to predict the future. Steady growth seems possible, but it might be hard to see where in the world the most rewarding growth may come.

If you are looking at your investment plans – and the beginning of the year might be a very good time to do so – it might be a sound tactic to get professional advice. At Continuum we would be very happy to provide it.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action

The value of investments can fall as well as rise and you may get back less than you invested.

Sources:

oecd.org – OECD Economic Outlook – November 2018

ft.com – UK deficit falls to lowest level since before financial crisis – July 20th 2018