Global growth set to edge higher in 2018

Jonathan Wright
Jonathan Wright
Fidelity Personal Investing12 January 2018

For the first time since the global financial crisis, all major regions of the world are experiencing an uptick in economic growth, according to the World Bank in its latest half-yearly Global Economic Prospects Report. It also forecasts a recovery in manufacturing, investment and trade which would mean global growth of 3.1% this year, up from 2.9% predicted last June.

However, the Bank warns against complacency, saying the acceleration in growth would be temporary unless governments implement structural reforms to raise long-term growth potential.

Looking at the Bank’s regional forecasts, the Eurozone continues to look positive, with its growth rate in 2017 upgraded by 0.7 points to 2.4%. This is expected to continue in 2018, with this year’s estimates raised by 0.6 points to 2.1%.

Figures for the US and Japan were also upgraded, albeit by smaller amounts, with the US forecast revised up by 0.1% to 2.3% for this year and Japan up by 0.3% to 1.3%.

As the UK and US markets hit record highs this week, investors will be keen to see if the momentum we saw in stock markets last year continues into this year. Those that believe in the ‘January effect’, best summarised in the adage “As goes January, so goes the year” will be paying close attention to how stocks perform this month.

Looking back over the past year, those investors that stayed invested, undeterred by the uncertainties of interest rate rises, elections and the ongoing Brexit negotiations were rewarded with a vintage year of low volatility and healthy returns - especially those investors who were well diversified across the key regions.

Despite all the focus on the UK and US reaching ever new highs, it was actually Asia that delivered the strongest performance last year, with Europe picking up the pace once the elections were out of the way and Japan enjoying an uptick in the Autumn as North Korean tension eased and Prime Minister Shinzo Abe was re-elected. As ever it paid to be well diversified.

As we look ahead to a New Year, with the bull market now nearing its ninth anniversary, it is understandable that investors will be wondering where in the world to allocate their money. In our latest issue of Investment Outlook, which was published this week with a live webcast, Investment Director Tom Stevenson shared his views on what we can expect for the year ahead and where the opportunities lie. If you weren’t able to watch the webcast live on Tuesday evening, a good starting point would be to set aside half an hour this weekend to watch it on-demand. Alternatively, you can download this week’s MoneyTalk podcast, which also discusses the outlook.

In the webcast Tom gives a ten minute presentation summarising the latest Investment Outlook, followed by twenty minutes of Q&A with Fidelity investors. Some of the questions he answers include: ‘Is Bitcoin a bubble?’, ‘When will the bull market end?’ and ‘Should we be worried about the bond market?’

As well as the webcast the Investment Outlook report discusses in detail the prospects for the key asset classes - equities, bonds, property and commodities. It also summarises the outlook for equities in the main regions of the world - US, UK, Europe, Asia-Pacific ex Japan/Emerging Markets and Japan.

At the back of the Investment Outlook we list the entire Select 50 range of recommended funds, split conveniently into eight straightforward categories. So if, for example you’re looking for a global fund, we list the five global funds our experts recommend with the performance of each fund over the last five years to make comparing easy.

While none of us know what the highs and lows of this year will be, one thing we can be confident about is holding a diversified portfolio of funds, investing in the key markets around the world, is one smart way to take advantage of stockmarket growth wherever it might be.

Important information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment. The Select 50 is not a recommendation to buy or sell a fund. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.