Global economic trends in 2016 Ben Barlow examines the topics that may define the markets through the year The financial market upheaval witnessed since the Brexit referendum has led to a large amount of commentary in trading circles. People have been quick to try and unravel what such an outcome will mean for the remainder of the year, and how it will impact international investment in the months to come. This is unsurprising. Each of us knows that the markets are no more than a mirror of the real world and its economic cycles, and that our jobs as investors, commentators, brokers, and so on is to try to decipher the messages left in the ever-shifting sand. But why not cast the net a little further still? Past Brexit, to the other themes that look set to impact us. It may all be supposition as it stands, but here are just a few of the topics that we believe will define the markets going forwards through the year… Brexit The Brexit referendum is likely to be one of the defining points for both economic and investment trends in 2016. We have seen the value of sterling drop to a 31-year low, the FTSE 100 freefall, and the British economy loses a phenomenal £250 billion in a single day. The effects of this are not going to be limited to the United Kingdom; the shockwaves will ripple across the markets. We have already seen a crash in the Japanese stock market, but we will also have to consider what this means for the rest of the European Union as they cope with the loss of one of their biggest economic players. Japan In the wake of Brexit, the Japanese stock market came to a juddering standstill, but this is not the only problem that looks set to plague it as we progress through 2016. Many of the long-term headwinds beleaguering Europe are assaulting its markets too, and it is poorly positioned to deal with them. Excessively leveraged and seemingly unable to sustain meaningful growth or inflation, it has seen its monetary policy ease at frankly astonishing levels. Although this does not spell certain disaster, it does mean that timing will be important for those looking to invest in its markets. Changing demographic trends A third theme to be aware of will be changing demographic trends across the globe. We are seeing a steady yet dramatic decline in the growth rate of the working age population, and although this has not featured overmuch in the headlines, it may have as great an impact as either of the points mentioned above. It seems likely to have a marked influence on the trajectories of the developed markets that it will affect, and could damage aggregate demand in regions such as Europe, America, Australia, and Japan, thus limiting their growth. Global growth dispersion Finally, you ought to be aware of a potential increase in global growth dispersion. The hypothesised outcome of this will be an increased divergence of monetary policy by region, with the evolution of economies likely to occur at an unprecedented rate. This could potentially cause real disparity between more and less developed markets, with more commodity-dependent emerging nations, like Brazil, left behind their more advanced counterparts. Increased political risk will also cause disparities between these nations and oil-rich countries, which may see a reduction in their turnover due to falling prices. 2016 has already proven itself worthy of extensive commentary, and it looks like there is more yet to come. With assets as diverse as currency, ETFs, and stocks all responding to these potential drivers, it seems that we could be looking at a very different economic and investment landscape come the close of the year. How will you protect your portfolio?


... it seems that we could be looking at a very different economic and investment landscape come the close of the year