Our fears for 2018: same as our fears for 2017

The things that concern us about the global economy and markets – and that should concern you, too – haven’t changed much in the last 12 months, says Merryn Somerset Webb.

This time last year we worried about stockmarkets. Most had been going up for too long and were too expensive. We figured the great bond bull market must be near an end. And we felt the inflation that we had long been sure quantitative easing (QE) would deliver was beginning to appear in the real world (it's been apparent in asset markets for years). We also worried about politics: the QE-driven rise in wealth inequality was having consequences most obviously Corbynism and Trumpism. We expected to see growing state interference in the economy as governments tried to shift profits from managers and shareholders to workers. We were especially concerned that the monopolistic US tech stocks would end up at the centre of that storm.

We were, as usual, a bit early. Last year offered a fair amount of political turmoil but outside the imaginations of newspaper columnists not that much drama. We have the same prime minister as in January last year. Brexit is turning out, as we suspected, to be more of a tricky administrative unwind than a social or economic disaster. Donald Trump has not (yet) started a war. Bonds wobbled mid-year, but recovered. The FTSE 100 gained 7.6% over the year. The only asset class that really started to move as the fundamentals suggested it should was prime London property down 4%, according to Savills.

So what of this year? Turn to our cover story and you will see that the things that concern us, that concern our experts, and that should be concerning you, really haven't changed. Tech stocks are still vulnerable to shifting sentiment (they were the goodies now they are tax-avoiding, worker-exploiting monopolies); and also to the realisation that some of those on very high valuations don't have the networking effects that make the likes of Facebook so valuable. You have to be on the same social networking site as your friends, but any electric car manufacturer that makes good cars will do.

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The US market is still horribly overpriced. Inflation remains the big risk: workers are demanding a bigger part of the global pie (quite rightly) and governments are increasingly onside. Finally, the reversal of extreme monetary policy is now a real possibility. We are all for that, given the economic distortions it has produced. But just as taking interest rates to record lows had unexpected side effects, raising them will too.

The good news is there are still great opportunities out there. Vietnam is cheap. Japan still looks good. The march of digitalisation suggests that sharp rises in productivity (and profitability) lie ahead. And, in a rare bout of consensus (perhaps an indication that we may be at the beginning of the end of the great financial crisis), all our experts agree that financial stocks are worth looking at. Maybe they finally are.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.