2017 Look Ahead: City & Markets

by Tim Rowntree

Even Roald Dahl may have struggled to come up with a more unexpected storyline for 2016. It was a year of surprises and one that pollsters would like to forget. Bookmaker Paddy Power was so sure about the US Election result that it paid out $1 million early to punters who backed Hillary Clinton. One of the few to get the Brexit result right ahead of time was a poll of Saga members, who predicted a 52% vote for Leave – writes Tim Rowntree.

2017 will be a year of dealing with the consequences of Brexit, Trump and other political upsets.

The City and financial markets don’t like uncertainty. But now that some of these things have happened, we are dealing with a more certain uncertainty. Or as Donald Rumsfeld put it, known unknowns. As people who have been diagnosed with a serious illness will tell you, once you have got over the initial shock, things can get easier once you start dealing with the issue. Sure, we won’t have answers on a lot of things, but the City is pretty savvy at working out possible scenarios.

Two direct consequences of Brexit:

First:  UK consumers will start to feel the effect of weaker sterling. To date, they have been protected by currency hedging, or by goods already paid for in advance. It won’t just be Marmite that goes up in price or Toblerone down in weight next year.

Second: UK assets or businesses that looked attractive before, will look even more attractive to foreign buyers. We have already seen it in late 2016 and you should expect it to be a feature of the M&A market in 2017, particularly with buyers from China and a Trumped-up US.

and finally ….

As traditional as mince pies at Christmas, in January, IPO practitioners will be predicting 2017 as the Year of the IPO. What 2016 has reminded us is that every year is the year of the IPO, as long as your IPO is a well-managed business, with good prospects and sensibly priced. In uncertain markets, maybe fund managers may have to look harder to find good returns and decent IPOs may be part of the answer. But they need to be Dragons, not Dogs, in the Year of the Rooster.

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