Stocks did extremely well last year but Neil Woodford of Patient Capital Trust is worried the good times may not continue. "Much of what we saw in 2016 does not appear to be grounded in fundamentals", he told Money Marketing it was instead driven by "sentiment and momentum". In particular, Woodford fears investors are overlooking that, in both Britain and the US, budgetary conditions are "constraining" due to "eye-watering" levels of public debt. This limits the scope cutting taxes or raising public spending, something that markets seem to be taking for granted.
Investors also need to consider what's happening in the rest of the world. The rise of populism "could pose an existential threat to the eurozone project". As for emerging economies, these "tend to be more trade-reliant", and so the return of protectionism "could be another headwind for them". A stronger dollar could also be "bad news for the developing world, which is very dependent on dollar liquidity". Alongside "China's deflating credit bubble and slowing economy", these "are all risks to the global outlook that should be considered carefully".
MoneyWeek
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