‘Value’ stocks started to make a comeback last December, with some professional investors suggesting this could be a trend to look out for this year. Experts are watching the valuation gap between growth and value stocks very closely, commenting that a stock market rotation out of growth into value is something that has been witnessed in the run up to a number of financial downturns.
Many commentators are highlighting ‘digital disruption’ as a theme to watch, with many businesses looking to artificial intelligence and automation to open new markets and serve customers more efficiently. Experts say the ‘internet of things’, while still in a very early phase, impacts most sectors and the interconnections of the online world create many investment opportunities.
Some experts are predicting the remarkably placid markets of 2017 are unlikely to continue this year. If volatility does return, many suspect it will be driven by bond markets and, unless inflation rises materially and sustainably, they say bond yields seem likely to remain at levels that offer support to equity markets, rather than emerge as a competitive alternative.
With central banks beginning the process of unwinding Quantitative Easing, experts say 2018 could be a challenging and volatile year for investors. They say long-term trends, like ageing populations, an overly indebted world and the disruption brought about by technology are all likely to play a part in supressing economic growth and inflation for longer than many people may think.
With valuations across both bonds and equities looking high, experts say a major challenge for investors is finding genuine alternatives that offer diversification away from mainstream asset classes. But they warn that some alternatives, such as real estate funds, may prove too exposed to the UK economy. With the London property market showing signs of slowing down as a result of Brexit negotiations, some property investors are favouring other regions, such as the North West and Yorkshire.
While mining stocks were a great success over the last two years, experts are saying the health of the Chinese economy is likely to weigh on this sector’s prospects this year. However, they say commodities stocks are likely to be supported by improved global economic growth and initiatives in place to improve balance sheets and lower debt across many companies, which should help to deliver more stable profits over the year.
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