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Reasons to be cheerful

Jonathan Wright

Jonathan Wright - Fidelity Personal Investing

I won’t sit on the fence here, I hate winter. Especially January. Once the Christmas celebrations are over it can feel a real slog till the daffodils start to appear in March.

I’m not the only one. We’re approaching Blue Monday on 21 January, dubbed one of the most depressing days of the year. Traditionally this falls on the third Monday of the year, when the Christmas credit card bills land, sunlight levels are low and the weather is cold.

Like the “snow birds” of the US and Canada, who migrate to the warmth of sunny Florida, my retirement goal is to be able to head to the southern hemisphere in January and return once the clocks spring forward. Of course, whether or not I’m able to get there depends on the performance of my pensions and ISAs. And at this time of the year a lot of us will be looking at our investments to see how far we are from our targets.

From an economic perspective it doesn’t feel like there’s a lot of good news out there at the moment. This week we’ve learnt British retailers have had their worst Christmas trading period for ten years. Then there’s Jaguar Land Rover cutting 4,500 UK jobs, followed by Ford announcing they’re in talks with unions over thousands of job cuts both here and in Europe. Plus there’s all the uncertainty around Brexit, of course, due to happen co-incidentally the weekend the clocks go forward.

Are there any reasons to be cheerful? In this week’s Investment Outlook webcast, investment director Tom Stevenson took a more positive tone. Following the correction in markets that took place towards the end of last year, he has become cautiously optimistic.  Answering a question about the outlook for stock markets he said “If you had asked me that question three months ago, I would have given a different answer, but the fairly savage correction in markets during the last quarter of 2018 has certainly changed the picture. I’m more optimistic than I was.”

In the latest January 2019 Investment Outlook he is now positive on the US, UK, Asia-Pacific and Japan regions, believing Japan is oversold, while China and other emerging markets represent an interesting contrarian opportunity.

In his opinion, the three key drivers of shares in 2019 are the outlook for corporate earnings, the price that investors are prepared to pay for a share of these earnings and what alternatives are on offer. On all three fronts, he sees reasons for optimism as earnings are still growing, valuations are not stretched, and shares still offer better prospects than other asset classes.

If you missed the live webcast you can watch it here, as well as read the latest report, which includes Tom’s four fund picks for 2019.

However, more volatility in the short-term cannot be ruled out. Investing should always be a long-term endeavour as there are always unexpected events which can spark stock market volatility. That’s why, now more than ever, it pays to be diversified. Maybe now, at this time of the year, it’s time to give your investments a thorough health check and ask yourself some questions: Are you too concentrated in one geographical region? Is your portfolio too cautious to reach your goals?

This examination should include pensions as well as ISAs, as combined they can each play an important role in short and longer-term financial planning. For example, you may wish to ease slowly into retirement, working part-time by dipping into ISAs, so you can leave your pension pot to carry on growing till a later date. So it might be appropriate to take a more cautious approach to the investments you’ll be dipping into first.

Even if retirement is a long way off, paying close attention to the funds your pension pots are invested in and, just as importantly, how much you’re contributing to them, could make a massive difference to when and how you retire one day. And whether or not that is in sunnier climes.

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Tax treatment for ISAs and pensions depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.