What investors need to be aware of in 2017

Investors need to position themselves in order to ensure they are best-placed to take advantage of the opportunities in the evolving global economy

2017 looks set to be a good year for investors. It should be a year in which savvy investors can seriously build their wealth. But this strong outlook does come with some important caveats.
2016 was a seismic year and the world has changed. As such, investors need to position themselves in order to ensure they are best-placed to take advantage of the opportunities in the evolving global economy, to circumnavigate the risks, and to remain fully on-track to reach their long-term financial goals.
Here are four key 'headwinds' of which investors in the UAE must be aware throughout 2017 if they are to benefit from the new era and changing investment landscape.
First is the impact of the policies of Donald Trump's administration. He focused much of his presidential campaign on US job creation, tax cuts and investment in infrastructure. Recent data shows that the American economy - still the world's largest -- has been given a boost from the forthcoming Trump presidency. But given the already near full employment rate, inflation could go higher than the Fed's goal of two per cent.
If this happens, the Fed, which is the world's defacto central bank, could raise interest rates quicker than markets anticipate to cool down the economy.
Second is Brexit and the EU. Elections are due to take place in France, Germany and the Netherlands in 2017, while Brexit negotiations between the UK and the EU are expected to begin by the end of March.
The threat is that anti-establishment votes dominate 2017's elections. The fear is that a vote for figures such as the National Front's Marine Le Pen in France could put further pressure on the world's largest single trading bloc at a time when it is struggling with the divorce proceedings with one of its most influential member states and key contributors.
The political upheaval caused by Brexit and the uncertainty of elections in the EU is likely to create volatility in the markets that will, of course, have a global impact.
Third is bond and interest rates. Bond yields, which parallel interest rates, have decreased for over two decades. But it is now likely that the era of low and negative rates is coming to an end. In short, many believe that bond yields have bottomed and yields are going to steepen.
This scenario is not only based on the US and UK. In Germany, for example, a fiscal surplus is likely to mean the end of austerity measures there. Whilst Japan appears able to run sizeable deficits with impunity, and more fiscal stimulus measures are likely to be announced throughout the year.
And fourth is emerging markets. Emerging markets generally rallied throughout 2016, but after the election of Trump they once again came under pressure.
There may be continuing recovery in countries such as the UAE, Brazil and Russia, as oil and gas prices stabilise at considerably higher levels than this time last year. And healthy demand in America will support exports, barring any trade tariffs introduced by Washington.
However, emerging market nations collectively hold approximately $9 trillion of USD debt, which becomes increasingly expensive to repay in local currency terms as and when the dollar rises. In addition, political risk remains high in many of the major emerging markets, not least in some of those countries that are currently benefitting from the increase in energy prices.
The Gulf region outlook
Improving demand for energy, together with a stronger US dollar, is a double gift for the Gulf economies that will help ease pressure on public finances and boost economic activity in the region more generally. But rising energy prices are also partly predicated on December's deal between Opec and non-Opec countries to limit production holding up. Opec itself has a poor record in compliance to its own rules, while non-Opec Russia is relatively new and untested in this field.
Emirates NBD, a regional bank, is forecasting Gulf stock market gains of around 10 per cent this year, with a further five per cent coming from dividends. Improved corporate earnings will drive stock markets, as the effect of higher energy prices is felt across industries. Furthermore, they anticipate emerging market investors switching into Gulf equities as trade tensions between the U.S and India and China rise.
If investors bear these four key risks highlighted above in mind, avoid complacency, and ensure they are suitably diversified across asset class, sector, region and currency exposure, they will be best-placed to take advantage of 2017's shifting investment landscape.
The writer is founder and CEO of deVere Group. Views expressed are his own and do not reflect the newspaper's policy.