Belfast Telegraph

Diversifying is a must for volatile 2017

By Mark Larsson

Investors should diversify if they are to weather the uncertainty facing them in 2017. This year is shaping up to be an interesting one, as we wait to see Donald Trump's policies after he becomes US President and the outline of a Brexit plan starts to emerge.

Asset markets will, as always, remain volatile over short time periods, especially in 2017 as politicians become more important in deciding the economic landscape going forward.

With this in mind, if inflation continues to recover and there is a large fiscal expansion in the US, then US $ TIPS (inflation linked bonds) will be a good play to both protect your money and for a UK investor you may get a boost on the currency as well.

On pure valuation grounds, emerging markets continue to look good value, with signs of stabilising and improving earnings growth, which should continue to boost equity markets - although as we have seen over the last month, they will very much be driven by US policy and dollar movements over the short term.

For UK investors, mid and small cap companies have significantly underperformed over 2016 - but that should change.

As long as the pound does not continue to weaken, we see this reversing over the course of 2017 on better earnings potential of stocks lower down the capitalisation scale.

This has a big caveat that until we know what Brexit means, markets will continue to trade on news flow and currency moves rather than fundamentals.

As a pure contrarian play and for those clients who are willing to take on a high level of risk, Russia may work out well in 2017.

This is based on an oil price recovery after the recent Opec agreement and a potential loosening of sanctions as President Putin becomes best friends with 'The Donald'.

As always it is impossible to predict what will happen in the future, so we would always look to build a diversified portfolio to manage the journey through these volatile periods.

Mark Larsson is an investment analyst at wealth management firm Johnston Campbell

Belfast Telegraph