As I am in no way licensed to give financial advice, here are some areas to look at that may have an impact on investment strategy but are not investment strategies in themselves:
European banks
Basel III and similar regulation from Brussels, as well as ongoing actions of various central banks, will continue to not just prop up the banks but to make sure they work for more than its board members.
Their business will be split between those that invest and those that lend, and they will be forced to hold greater amounts of capital reserves so that they can pay off their next mistake not the taxpayer.
Whether this means they will be as sound an investment for equity or bond fund managers, particularly from an income/dividend point of view, is not clear but 2013 will be a year of greater confidence in banks.
Ratings agencies
They have had a continued bad press ever since criticism over their lack of ability to spot the events of 2007/2008. Whenever they have downgraded government debt – in particular the action of just one agency, Standard & Poor’s in 2011, to cut the US rating – they have not been taken as (particularly?) seriously.
Next year we will continue to see more targeted research done on the end investment, with less attention paid to on what specific ratings agencies say.
This may even feed down to the quant fund rating agencies such as FE and Morningstar with wealth managers doing greater amounts of due diligence themselves or using the research of other, bigger discretionary and qualitative research businesses.
Macro outlook
Nothing will change. China will still grow but slowly; the US will still grow but even more slowly – its fiscal cliff will have little impact on wealth managers strategies; UK GDP will stay flat; Greece will not leave the euro. We are well and truly living in the 1% world with inflation, interest rates and GDP growth being low single digits for most of the developed economies for 2013 and beyond.
The one change could be an improvement in emerging markets with global emerging market fund returning 12.5% in the past year compared to, say, 17% for UK All Companies. They still out-performed the US (11.3%) but their three year numbers (13.6% compare to 28% in both the US and UK) belong squarely in the ‘must do better’ column.
New Year/New Attitude
There are a lot of high-profile individuals on the distribution side of the fence either starting new roles with their company or different roles in new firms. Either way, they will be keen to show their new bosses/ teams their worth and the enthusiasm they will naturally bring to the role will hopefully have a positive knock-on effect.
And it is not just leaders in the UK investment field that will be out to impress.
On 21 January Barack Obama will be officially inaugurated as US President; Japan’s new Prime Minister will be a month into his job; Silvio Berlusconi may be closer to a return to the top of the political tree in Italy following the resignation of Mario Monti in December last year.
And then there’s Mark Carney who will still be five months away from his new job when he has in effect already begun as co-Governor of the Bank of England.
There will be more than a few surprises next year but something that is for certain is the fact that the usual end-of-year-straight-line-extrapolation-into- next-year will not be the way to manage money in 2013.
