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From the Stock Market to Property and Bitcoin: the UK Investment Guide to 2018

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It’s been both an eventful and generally fruitful year for investors. That includes those of us in the UK despite the fact that the London Stock Market’s returns have trailed those across the pond in the USA, closer to home in Europe and in much of Asia. Pound sterling has recovered to some extent against the dollar after its post-Brexit slump, though fared less well against the euro, with the eurozone enjoying a boom year.

Growth in property prices slowed after several strong years, with London and the southeast suffering in particular. However, the market was mixed with other regions doing very well over the course of 2017, particularly the Midlands, Edinburgh and Glasgow. Anyone who was brave enough to have a flutter on Bitcoin or one of the other major cryptocurrencies early in the year, or even more recently, will be feeling very smug heading into the Christmas and New Year holiday.

EIS investors were given a surprising boost at the Autumn Budget, with the investable limit doubled. There had been fears abuse of the young company investment scheme might lead to it being binned. Instead it has been significantly expanded in an attempt to keep the investment cash taps on for growing companies post-Brexit, albeit with qualification rules tightened up.  

So what might 2018 have in store for UK investors? Will the Brexit process derail the UK’s economy and see the stock market suffer? Or will growth accelerate and see returns compensate for a 2017 that was less impressive than for some of its international peers? Will the property market remain sluggish, get worse or see a return to growth? And will the Bitcoin bubble burst in spectacular fashion or see cryptocurrencies go mainstream and start to seriously challenge the incumbent fiat monetary system?

We don’t have a crystal ball and if we had any reliable idea how the 2018 investment landscape will actually turn out, we certainly wouldn’t be sitting here. It must be kept firmly in mind there are a huge number of unpredictable variables that will come into play throughout the year that will influence different investments. However, in this UK investment guide to 2018, we will take a brief look at the forecasts, trends and prospects for some of the asset classes you may well be considering for next year taking into account the information that is available. We hope it’s a prosperous New Year for you!

Equities

Overall, despite relatively high valuations, particularly in the U.S., the general consensus is an expectation that the bull market that has seen global equities for 5 of the past 6 years has another year or two still to run. The FTSE All-World Index has seen gains of almost 20% over 2017 and global GDP has also had its best period of growth since the international financial crisis. Central banks don’t appear to be in a mood to slow growth down for now, despite the expectation for gradual interest rate rises over the next five years and the ECB slowly winding down the rate of its bond purchases.

Global equities seem a strong bet for 2018 again and funds and indices that reflect the overall global economy worth looking at. The situation for UK equities is far less clear and much will depend upon Brexit negotiations and how they will impact both the strength of sterling and consumer confidence. A positive outlook would be that the slower rate of growth seen by UK equities over 2017 compared to the U.S., Europe and Asia leaves room for potentially more room for growth. The London Stock Exchange is on average close to historical value averages on a price to earnings basis. However, Brexit may well put a damper on things and volatility could be higher than recently. International looking equities are most likely the safest bet until the outcome of Brexit talks and fallout becomes clearer. However, there are cyclical domestic-facing stocks that currently look undervalued for investors with a longer time horizon and who can wait out potential Brexit volatility over the next few years.

With Trump’s tax cuts likely to pass into law this week, and at the latest in January, U.S. equities could still see another strong year in 2018, despite a record-breaking 2017. How long their phenomenal bull rally can continue is debatable and much will depend upon what real impact a 15% corporate tax cut has on earnings. However, the immediate boost the reform bill will have could well mean another strong performance from Wall Street.

The Chinese economy is slowing down but has avoided a hard landing. This well-managed easing, if it continues as it has done over the past several years would be positive for equities. It will, as the world’s biggest consumer of commodities, keep their prices, and subsequently global inflation, under control. This, in turn, will keep interest rates low.

Despite seeing huge value growth this year, many analysts also remain bullish on the big technology stocks such as Facebook and Amazon if the global economy keeps doing well. Japanese equities also look set to continue their recent resurgence and the outlook for Asia generally looks positive. A strong return to growth in the EU also doesn’t look like faltering over the next year barring any unexpected major change.

Property Investment

The outlook for the UK’s property market is a mixed bag for 2018. Overall, the consensus is that national house prices will remain steady but show little or no growth. However, buy-to-let investors would do well to focus on a much more regional level. London and the southeast is expected by RICS and Halifax to see a modest slide and to be a buyers’ market. This could provide an opportunity for buyers looking at investment properties to secure better prices than seen over the last couple of years with some bargaining leverage likely to be available to them. Prices are also expected to return to strong growth by 2019/20.

For good short term price growth, RICS is forecasting strong growth in northern regions of the UK. Scotland, the North West, Northern Ireland and Wales are all expected to have a good 2018. The balance between drops in house prices in the south and growth in the north is what is expected to lead to overall price growth neutrality for the country as a whole.

Cryptocurrencies

After such a spectacular 2017, particularly over the past couple of months, it would seem remiss to not mention the potential prospects for Bitcoin and the other major cryptocurrencies over the course of 2018. With gains of well over 1500% for 2017, anyone who bet on Bitcoin in 2017 will have achieved unprecedented returns – presuming of course these are locked in by selling the cryptocurrency. Other major cryptocurrencies such as Ethereum, Ripple and Litecoin have also seen huge gains and overall market cap of all significant cryptocurrencies has risen by almost 3000%.

Is it too late to get in on the action? Is 2018 set to see cryptocurrencies continue their march into the mainstream and another spectacular bull run? Many analysts have predicted Bitcoin to go as high as $60,000 or even $100,000 next year. Even more expect the bubble to pop spectacularly and Bitcoin and other cryptos to go back to being a niche with a small, enthusiastic following.

This author is a fan of cryptocurrencies but wouldn’t dare to speculate how 2018 will turn out. However, even the most enthusiastic cryptocurrency investors accept that their future is so unclear any investment must be made in full readiness to lose the entire sum. 




Risk Warning:

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

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