These are strange times politically speaking, from the election of Trump to the UK leaving the European Union, it seems that 2016 and 2017 were impossible to predict. Regardless, the financial markets will have to continue as usual. Here are some of the key trends in investing in 2018.
Whatever your opinion on bitcoin and other cryptocurrencies, 2017 was undoubtedly the year where everyone became an expert on the topic, sort of. All things point to 2018 being the year when bitcoin will be accepted as part of the financial landscape, or tank entirely and vanish from collective memory. 2018 has also given us futures trading in bitcoin, to add to the complexity, with early signs pointing to futures expiring wreaking havoc on bitcoin value. Short positions on expiring futures are making a tidy profit.
As bitcoin hogs, the headlines, don’t forget that technology is disrupting the financial industry. Fintech is changing how we invest, borrow, and save. In 2017 over $27.4 billion has been spent in the fintech industry and 2018 promises nothing less. Some of the hottest fintech companies come from China, with the likes of Ant Financial, ZhongAn, Lufax and Qudian to look out for. If it wasn’t clear already in 2017, this year would underline that the financial sector has been changed forever. Financial organizations who think they can do business in the same way they did five years ago, will be woefully behind three years from now. For investors, however, it is not as clear-cut as to where to invest. As with any fledgling industry, you will have meteoric risers, but also catastrophic implosions. The smart money will be on those fintech companies that reach maturity and start offering less propriety, more stackable solution.
AI is Here
Still, on the topic of future tech, artificial intelligence (AI) will continue to dominate the conversation on the future of investment as it did in 2017. The common theme last year as it will be this year is about control. AI evangelist will tell you to trust the machine entirely, and traditionalists will argue that a computer can not replace a human brain, at least not yet. It seems clear that we are fine to trust AI when driving a car, although still a bit uncomforting, but not at all to handle our money. We are moving to a compromise where we trust AI to take care of day-to-day routine transactions, where there can be benefits in lower charges, and let us humans take care of the bigger stuff, such as real-life interactions and anticipation and defining portfolio mixes. What we are comfortable with now is automated trading software where we can determine and test strategies before setting them live in the real world.
BRIC Is Back
Speaking of the real world, the so-called BRIC countries (Brazil, Russia, India, and China) are back. Jim O’Neill, the former chairperson of Goldman Sachs Asset Management, predicted in 2001 that these would be the fastest growing emerging markets for the decade. Now that prediction only partially came to fruition, and in 2015 Goldman Sachs closed its BRIC centric fund after years of losses. However, just a few years after that fact. The IMF has revised its growth forecast for these countries to 4.9pc for 2018, that is versus 4.6pc in 2017 and 4.3pc in 2016. The steady growth with the potential of favorable economic policies due to declining inflation makes the BRIC countries potentially hot property again. Adding companies with strong roots in these countries might be a wise move for anyone’s investment portfolios.
Changes in portfolios might follow the rise of some alternative assets. PWC expects for 2018 that portfolios will shift to commodities, private equity, property, and infrastructure. Commodity equity valuations seem relatively cheap relative to underlying prices. In 2017 $621 billion was raised for private equity, breaking the previous record set in 2008 at $557 billion. Real estate outlook for 2018 is good for both the office and retail markets, with lack of inventory being the primary driver. Globally countries continue to invest in infrastructure, and we expect that trend to continue. PWC estimates that these assets will make grow from $10.1 trillion worldwide under fund management in 2016, rising to $13.9 trillion by 2020. If hedging your portfolio is one of your goals in 2018, considering alternative assets might be the right way to go.
Whatever you invest in, realize that investing is at risk. You may get back less money than you initially invested. Past performance is no guarantee for future performance and never invest more than you can afford.
You must log in to post a comment.