When you look ahead to 2013, your glass could be half full or half empty. In the UK the lights have just gone out in the last Comet store. And yet Nissan are pumping £250m into Sunderland to build a luxury small car and create hundreds of jobs.

The employment data in the US has been consistently moving in the right direction for the last 27 months. But every 20 months the country finds itself another $1tn dollars in debt.

The World Bank has just revised its estimate of China’s growth for 2013 up to 8.4% – a level established economies in the West can’t even dream about. But China is in an increasingly bitter dispute with Japan over the Senkaku Islands. Meanwhile a North Korean rocket has been orbiting the Earth…

So what does all this mean for you and your investments and savings? We’ve gazed into our crystal ball to see how some of the key areas of the economy and the political scene might affect you in 2013.

Housing market

Let’s begin with the housing market – where again there was good and bad news as 2012 ended. Prices remain broadly flat: mortgages are difficult to come by and many people who rushed into buy-to-let would cheerfully sell up, if only they could… Yet recent figures saw a 14% jump in approvals of first-time buyer loans, with first-time buyers now accounting for 40% of all house purchases. Surely that must be the first green shoot that the housing market is looking for?

We don’t see house prices rising dramatically in 2013 – but we’d like to think that as the UK economy gradually improves the mortgage lenders loosen some of their rather restrictive guidelines.

The UK Economy

George Osborne has just unveiled his Autumn Statement, and is set to deliver his Budget speech on March 20th. It was clear from the Autumn Statement that austerity will continue, with Osborne relying on a strategy of 80% cuts and 20% tax rises to eliminate the deficit. So on the surface, no good news there. But December saw figures published confirming that more people are now employed in the private sector than ever before: the unemployment rate in the UK is well below the figure for mainland Europe.

The UK is now far better placed than many economies, and should gradually improve through 2013. But it will be a long road, and there will be more twists and turns along the way.

UK Politics

Like the weather, the political scene in the UK is changeable. Perhaps the most worrying factor is the public’s lack of enthusiasm for any of the major parties and we’d expect to see the fringe parties continue to make gains, especially in by-elections. In the absence of a political upheaval, the Coalition Government will limp on, and the Prime Minister will continue to cross the Channel on regular occasions to fight the UK’s corner against the demands – both financial and political – of the EU.

The World Economy

These notes were written a few days before Christmas, and at the time, Barack Obama and the US Congress had still not sorted out a deal on the ‘Fiscal Cliff’ – the raft of tax cuts introduced by the Bush administration which are due to expire in January. If there is no deal, middle America will be hit hard with almost inevitably serious consequences for the American and world economies. This writer is betting on a last minute deal…

Whether the World Bank is right or wrong about the figures, the Chinese economy will continue to grow – as will the economies in countries like India, Bangladesh, Mexico and Venezuela. The balance of power is shifting away from the traditional industrialised countries and clients looking for long term growth – and their advisers – will need to recognise this.

In Europe, it seems inevitable that problems will persist – whether they are in Greece or Spain, or in the EU budget itself. The safest prediction is that the patience of the prudent nations with their spendthrift neighbours will increasingly wear thin. The results of the German election in 2013 will be revealing. Whoever is elected as Chancellor will be preaching the virtues of good housekeeping – a message that may well lead to increase friction with the French President.

Stock markets

Only two things seem certain in 2013. World stock markets will continue to be volatile and there’ll inevitably be good and bad weeks and months depending on the news coming out of Washington, London and Brussels. The other one? Stock markets that you’ve never heard of will continue to be the outstanding performers. Over the last twelve months, the best performing world stock market has been Venezuela; Pakistan and Turkey have also had excellent years. As we noted above, there is a long term shift away from the ‘established’ economies and stock markets are gradually come to reflect that fact.

As to the FTSE, at the time of writing it stands at 5,964, compared to 5,572 at the start of the year. That’s a rise of 7% and a similar performance in 2013 would see the market up to around 6,400. Most advisers and investors would happily accept that level if they were offered it now!


If two things were certain about stock markets, then three factors can be relied on with pensions legislation in 2013:

• Auto-enrolment will roll on, meaning that more workers are enrolled in company pension schemes – but not at levels of contribution that will lead to anything like a comfortable retirement• Despite claims that they favour the better off, pensions will be continue to be a very tax effective way of saving• Sadly, by this time next year your retirement will be a year closer – and saving for that retirement is more important than it ever was.

And what about us?

At last, one area where there is no ambiguity! We’ll be at our desks throughout the coming year and remain committed to providing all our clients – and potential clients – with the very best independent financial advice. If you have any questions at any time then simply pick up the phone or email us. We’re always happy to help.

Please note: The comments in this article are general comments only, and should not be taken as being specific investment advice.


Sources: http://www.guardian.co.uk/money/2012/dec/12/first-time-buyer-mortgage-lending-rise