Looking back over the first half of 2016, the FTSE 100 index increased by 6.7 percent when dividend payments are taken into account. However, this positive performance disguises the substantial equity market volatility seen in February, and again following the Brexit decision in June. The moves in the headline index are again misleading and market outlook is clouded in political maneuvering.
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UK’s vote to leave the EU has escorted in what could be a long period of uncertainty and volatility in the market. There is also skepticism about the recent, liquidity-driven bounce in risky assets. Overall, global equities and bonds should be range bound during the remainder of 2016, although both are at the higher end of their prospective ranges. Volatility will persist due to global uncertainty, and there will most likely be a shift toward fiscal stimulus.
The 'leave' campaign, a victory for the pro-Brexit voters, was quite a surprise to markets and the world. The United Kingdom, based on a referendum of all eligible citizens, voted to leave the European Union (EU) and became the first country to do so. The effects of the referendum vote are already being felt in the political spectrum and the financial markets. However, the structural changes will take some time. Financial markets, on the other hand, have not and will not take years to digest this revolution.
Bond markets globally were off to a slow start at the beginning of the quarter, but began to drive higher as the Brexit vote approached and eventually jumped on the result as investors sought out safe-haven assets. The Barclays Universal Bond Index gained 2.53 percent in the second quarter; the gauge has advanced 5.68 percent so far this year through June. Interestingly, domestic and some international equity markets have largely recovered from their post-Brexit lows, but fixed income markets have remained at elevated levels as investors stay wary of the evolving economic landscape.
Since the election, investors have focused on the positive aspects of President Trump’s surprising electoral victory and the end of U.S. legislative gridlock. There will likely be times in the year ahead when the more worrisome, controversial initiatives pushed by the Trump administration will rattle investor confidence—at which point we would view U.S. equities as attractive. Although equity valuations are elevated in the U.S.
The Brexit vote and Donald Trump’s unexpected 2016 election victory have kicked off a wave of pro-nationalist sentiment across the globe. With several key Eurozone countries facing elections in 2017, leading economists and investors envision a possible reshuffling (and even a potential demise) of the European Union. Volatility typically accompanies political transitions, and investors should review their objectives and adjust accordingly. Remember that what goes down often comes back up—eventually.
Given the uncertainty after the 2016 presidential election, it is critical to implement the best strategies to minimize taxes come April 15, 2017 (and beyond). While it is unclear which tax reforms will be pursued and what order, there are considerations and informational points—broken down by tax areas in a summary of planned changes—that will provide some education relevant to higher-income taxpayers.
Wealth does not build itself, but it can be built, nurtured and preserved—not just for you and your generation, but for generations to come. In an unprecedented study into the insights of wealthy families, clear evidence of new wealth management strategies has emerged. There are signs of more inclusive decision-making within the family. Many are looking beyond the balance sheets as they redefine what success means to them. And, importantly, they’re relying more and more on their business acumen to adopt a systematic approach to wealth management.
Fund groups face disruptive developments, as advances in financial technology, often called fintech, continue at an ever more rapid pace. Even as new efficiencies and opportunities blossom, regulators have pushed financial firms to recognize the dangers of technological failures. To prepare for the changes ushered in by fintech, it is important for fund boards, investment managers and separate account advisers to have a deep understanding of the issues and risks surrounding Fintech developments.
Legal developments in digital currencies, including bitcoin, emerge almost on a daily basis across the global landscape. While in Argentina virtual currencies are not legal tender under the country’s National Constitution, in Croatia there are informal statements by the Croatian National Bank that look favorably on the legality of bitcoin. In Estonia, bitcoin income is treated as capital gains, and in Australia, virtual currency transactions are subject to goods and services taxes.