Investment markets - A review of 2017
Major global developed economies grew modestly during 2017. The US economy recovered after a disappointing first quarter as consumer spending and business capital expenditure picked up.
In the UK, both economic and political uncertainty heightened following the general election result in June and the start of Brexit negotiations.
Towards the end of the year economic activity in developed markets was most pronounced in the Eurozone, with economic confidence recording its highest level for more than a decade. 2017 saw the first increase in the rate of economic growth in emerging markets following six years of successive slowdowns. Brazilian and Russian economies improved throughout the year as commodity markets recovered.
Equity markets delivered strong positive returns with emerging markets outperforming developed markets. European equities were the best performing of the developed equity markets on clear signs of economic recovery. Japanese equities also performed well with the snap general election giving further support to Prime Minister Shino Abe’s reform drive. Elsewhere, equity returns in the US and UK were also positive as their economies continued to grow.
Government bond markets were held back by rising long-term interest rates in 2017, leading to weak returns. Global corporate bond markets had a broadly positive year thanks mainly to a continued backdrop of improving global economic growth and contained inflation levels. As with equity markets, global corporate bond markets remained resilient to warning comments from central banks, with investors judging that rising interest rates were an inevitable result of continued global economic growth.
In the UK commercial property market, capital growth in the industrial sector outpaced that of the other main sectors over the course of the year. The pace of rental growth eased considerably during the course of the year but returns overall were positive.