The world economy is still recovering from the financial crisis but it looks as though it is about to enter yet another volatile period. Brexit, elections in the EU and the increasing threat of a trade war all have the potential to destabilise markets in the coming months and years - making it a challenge for the average investor to keep their ship steady. That volatile future is particularly apparent on the stock markets, where the Dow Jones has fallen below 20,000 having only passed the historic mark last week.
"It's not unusual to see a consolidation around those marquee levels and 20,000 is obviously a marquee level," said Lori Heinel, Deputy Chief Investment Officer with State Street Global Advisors. "Having said that, we do foresee that equity prices will continue to grind higher and we think that's going to happen against a backdrop of growing-albeit-slow global growth and, particularly in the US, some fiscal stimulus prospects, some tax reform and potentially some regulatory roll-backs."
It is that mix of lower taxes and fewer regulations that seemed to excite markets to record highs last week, as they predict such moves would help to boost company profits in the short term at least. However the prospect of a trade war - be it between the US and its southern neighbour or the ever-growing China - would likely be very damaging to most companies. There is still some way to go before that happens, but it is clear that the new administration in the US is not necessarily going to give businesses everything they want - which in turn impacts on investor yields
"There are lots of landmines still out there and that kind of global trade consternation or even some random Twitter feed that drives the market crazy are things that investors are going to have to be a little worried about," said Ms Heinel. "What's interesting is that we're not seeing volatility as measured by traditional measures like the VIX in stocks, for example, be very high - in fact it's remained quite low. But what we do see are signs that more of these extreme tail risk measures is a place where you are picking up a lot of volatility so we do think the prospect for some kind of heightened volatility episode are ahead of us."
And when you are in an age where a single tweet can knock billions off the value of shares, it creates a significant challenge for would-be investors. According to Ms Heinel, the solution is to return to the basics. "First of all you have to go back to first principles and think 'where is the long-term value creation?'," she said. "We do believe that corporate earnings will be somewhat better in 2017, so that sets up a backdrop against which stocks can grind higher. If you have cash that you need to access in the next 12 months then don't be in the stock market, but if you have cash that can be invested for a longer horizon we do believe that ultimately fundamentals will prevail."
Investors should also take their location into account when planning investments - as the currency of choice can dictate the best approach to take. That is particularly true in a setting where interest rates are likely to rise in the US while staying flat in the EU - which is likely to push the exchange rate between the dollar and the euro in the coming months.
One question often asked of investment experts is what a well-invested individual might look to as somewhat of a 'wildcard' bet - assuming they have some extra money to play with. For Ms Heinel, the answer is gold. "One of the great diversifiers still, and in some ways a great insurance policy, is gold," she said. "Gold is one of those asset classes where it's hard to say from this moment whether it will go down 20% or up 20% - it's a pure currency in that sense and it's very sensitive to monetary policy. But when you have an environment where you're likely to have some shocks, having a bit of gold in the portfolio as an insurance buffer is not a bad idea," she added.
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MORNING BRIEFS - Almost 35 million tonnes of goods passed through Dublin Port last year, according to figures released this morning, an increase of 6.3% on 2015. The facility saw 14.7 million tonnes of goods exported in the year, up 6.7%, while import volumes were up 6.1% to 20.7 million tonnes. Volumes from containers loaded on and off of ships saw the biggest percentage growth in the year, up 8.1%, while containers driven on and off of ships were up 7.6%. The number of tourist vehicles travelling through the port rose by 1% last year, with passenger numbers rising to more than 1.8 million. Dublin Port also announced the first review of its Masterplan, which runs until 2040, which it says is necessary to ensure it reflects changing circumstances. Volumes at the port have risen by 25% in total in the past four years - way ahead of what was anticipated when the masterplan began in 2012
*** The Bank of Japan has raised its growth forecasts for the year to March, as well as its forecasts through to March 2019. The central bank now expects the country's economy to have grown by 1.4% by March this year and a further 1.5% next year. That compares to previous forecasts of 1% and 1.3% respectively. The Bank of Japan has also raised its expectations for the year to March 2019 - where it anticipates growth of 1.1% as opposed to 0.9%. The move comes on the back of a weaker yen, which is seen as a boon for the country's exporters. The central bank has also opted to maintain its ultra-loose fiscal policy for the foreseeable future.
*** Deutsche Bank has been fined $630m for its connection to a Russian money laundering scheme. Around $10 billion is said to have been laundered through the banks operations in Moscow, London and New York over a four year period, which saw shares being bought in rouble in one office and then quickly sold in dollar in another. Authorities in the US fined the bank $425m, with British authorities adding a further $204m.
