The euphoric rally of US stock markets is sustainable through 2018, forecasts a leading global analyst at deVere Group.

Tom Elliot, deVere Group’s International Investment Strategist, is speaking after America’s leading market indices - the Dow, S&P, and Nasdaq - finished at a record high following the end of the government shutdown.

Mr Elliott comments: “There’s been almost continual chatter in recent weeks on Wall Street and beyond about the current melt-up, before a forthcoming meltdown. It supposes that we’re experiencing the last euphoric rally in an asset class bull market, before the collapse.

“Whilst, it’s true that Wall Street is the most overvalued of the major stock markets, I am sceptical about an imminent collapse. Where would it be coming from? The only real risk is that bank account rates or bond yields rise sufficiently to persuade investors to sell shares and invest in risk-free assets.

“But with the inflation so low and the Fed being so cautious, I don’t see that happening any time soon. Another trigger for a sell-off might be a US recession. But again, no evidence of one around the corner.”

He continues: “US stock markets are likely to be supported by continuing strong corporate earnings growth, limiting any pull-back in share prices. The weak dollar boosts export earnings, while strong consumer confidence supports domestic-focused sectors.

“Tax cuts will be a net benefit to US corporate earnings, but the impact of changes to the tax code on individual sectors is as yet unpredictable. Fourth quarter earnings statements and outlook comments being reported shortly will hopefully offer clues.”

Mr Elliott concludes: “Against this backdrop, I believe that the current rally is sustainable through 2018, with the worst scenario perhaps being a strong early part of the year, followed by consolidation -with minimal gains- over the rest of the year.”

(Source: deVere Group)

Budgeting time is here, and you’re likely going to make some safe assumptions on the budgeting based on previous years, experience and forecast. But is are these backed by actual real data? Below John Orlando, CFO at Centage Corporation, talks Finance Monthly through data integration in budgeting, looking at specific trends we can expect in 2018.

At the present moment, the economic future looks good. Unemployment is dropping, inflation is manageable and both the House and Senate passed tax bills that will slash the corporate income tax rate, giving them added cash to grow. Over the past few months I’ve talked to many CFOs who say their companies are eager to expand and they’re actively building growth assumptions into their budgets.

However, even in the best of times, there are risks to growth since at any time some world event can affect economic conditions. Performance monitoring and forecasting are part and parcel to business success in a growth economy, and to the end, 2018 will see some positive data-driven trends emerge that will make it easy for executives to keep a watch over their businesses.

The data goldmine: CFOs and financial teams will look to the robust data-generated HR, CRM and other platforms to feed their budget models

Many mid-size companies have implemented third-party HR and CRM systems, platforms that generate robust datasets. For instance, PEO providers maintain detailed records on every type of employee or contractor who works with the company, as well as their benefit requirements. Salesforce.com tracks virtually any type of sales and metric important to the company. This data, much of it market-tested, offers a level of detail it would take an army to create. By entering or importing it into a budget model, finance teams can create highly detailed and robust budgets in a remarkably short time frame.

Organizations will be more assertive with their assumptions

With robust and accurate data from internal systems populating the budget, executive teams will have access to variance reporting that is far more accurate than ever before. Moreover, this level of specificity will prompt CFOs to be more assertive in their assumptions, as well as provide the confidence management teams need to execute on their growth plans.

Greater accountability in business decisions

Marketing pioneer John Wanamaker famously said, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” He wouldn’t say that if he were alive in 2018. The combination of robust data and better performance tracking will make it easier to assess the outcomes of virtually all business decisions (including advertising campaigns). The result will be greater accountability in business initiatives as CEOs obtain the tools to compare current results to the budget, forecasts and what occurred in the past.

With greater accountability comes greater learnings and more success

Armed with a better sense of what worked and what didn’t, business leaders will have keen insight into which activities, markets or initiatives are worth repeating. I can envision companies establishing new metrics with a greater degree of specificity than was possible in the past, supported by data-driven budgets and the ability to track budget versus the actual on a constant basis.

Forecasting will be the next big innovation in budgeting

Looking at the budget software market itself, I believe the next big innovation will be easy forecasting, driven by customer demand. CEOs in particular want streamlined and simple forecasting whether it be monthly, quarterly or half year, and will pressure their providers to deliver it.

I, of course, support this demand. As anyone responsible for a budget knows, within a few months of a budget’s completion, there’s a good chance some or all of it will be out of date. Benchmarks must be reset regularly as market or economic conditions change. If a particular product suddenly begins selling better than another, the company will no doubt want to rejigger resources in order to exploit the opportunity (or retrench in the face of disappointing sales). This is particularly true when companies are embarking on ambitious growth plans.

Growth opportunities and market conditions will move CFOs away from spreadsheets to budget models

Ten years ago, 90% of mid-size companies built their budgets in spreadsheets; today from what I see, it stands at 80%. As more and more executive teams realize the inherent power of a budget, I suspect that number will go down quickly, replaced by budgeting software that allows them to monitor performance much more frequently. But don’t expect a public mudslinging between budget-software providers. Growth in our market will come from first-time customers, rather than

From IoT to peer-to-peer offerings, the PPRO Group - specialists in cross-border electronic payments - have predicted key online payment trends for the year ahead. With digitisation in the world of payments progressing by leaps and bounds, the following seven developments are expected to make waves in 2018.

1. Internet of Payments

According to Gartner, the number of devices connected to the Internet of Things (IoT) is set to increase from 6.4 billion in 2016 to 20.8 billion in 2020. Consumers are increasingly expecting their IoT devices to enable more than just carrying out tasks automatically; they also expect them to facilitate payments. For example, consumers with connected fridges can expect to see depleated items restocked and automatically paid for. Visa is also working with Honda to develop technology that can detect when a car’s petrol is low and enables users to pay for a refill using an app that is connected to the in-car display.

2. Context-Based Payments

Anyone heading to the checkout, whether with a real or virtual shopping basket, often takes a moment to decide whether their purchase is really worth it. Integrating payment into the context of the shopping experience and transaction can help remove this barrier to sale. It renders the POS almost invisible, while the payment process runs automatically in the background of a shopping app being used.

Wireless payments – a concept already being implemented more frequently online – will also be used in brick and mortar stores. Customers will, in the future, no longer need to reach for their cash or a credit card; instead, they can pay wirelessly in passing – whether from their smartphone via Bluetooth, using the RFID chip in their debit card, or automatically by facial or voice recognition. This will make the transaction seamless, and leave little time for consumers to rethink their purchase.

3. Peer-to-Peer Payments

In 2018 payment processes will be increasingly integrated into peer-to-peer (P2P) systems. In India, for example, WhatsApp users can already use P2P payments to send money to friends during online chats. Apple is also implementing this feature with Apple Pay Cash. The new voice input technologies, such as Alexa, Siri and Cortana, mean that P2P payments and banking transactions can also be carried out using voice commands.

4. Real-Time Payments

The push pay model makes real-time payments possible. Thanks to the SEPA Instant Credit Transfer (SCT Inst) scheme, the requisite European infrastructure has been in place since 21^st November 2017. In Germany, it is already supported by the UniCredit Bank, the Deutsche Kredit Bank, and many savings banks. But it will probably be some time before the majority of banks are using the new system – perhaps not until participation becomes mandatory.

In 2018, however, additional German participants are expected to join the scheme as market pressure increases. It will be interesting to see the extent to which SCT Inst will open up new payment methods and how much retailers, in particular, will take advantage of the speed and reliability of real-time transfers to convert their processes to genuine real-time transactions.

5. Partnership between Banks and Fintechs

The technical specifications (Regulatory Technical Standards, RTS) defined by the European Commission for the new Payment Service Directive, PSD2, represent a major compromise between the interests of the established banking industry and the European FinTechs.

From the FinTech point of view, it would have been better to offer them the same as banks, and a free choice of using APIs or access via online banking. This would have resulted in good APIs being used while poor ones were ignored, creating a kind of self-regulation. At least, however, the new version is less of a threat to the European FinTech sector than the original version issued by the EBA at the end of February 2017. This is expected to result in a solid foundation which will foster increased competition and security in payment processes, which will provide both retailers and consumers with more choice and information monitoring.

6. Decentralisation through Blockchain Technologies

The technological basis for Bitcoin and other cryptocurrencies will facilitate the creation of more innovative financial solutions in 2018. Institutions will use blockchain technology to establish direct connections, thus eliminating the need for intermediary or correspondence banks.

Nasdaq has already created a platform which allows private companies to issue and trade shares via blockchain. Here, the complete trading process – from execution to clearing to settlement – takes place almost in real-time, while the technology allows traceability. Blockchain can also be used by regulators as a completely transparent and accessible recording system, thus making auditing and financial reporting considerably more efficient. The number of uses for blockchain is constantly increasing and, although the technology has not yet actually achieved breakthrough status, like many radical technological shifts, it needs time to establish itself.

7. Commercialisation of MNO Wallets

More than two billion people globally currently do not have access to financial services. In many countries with low financial inclusion, peer-to peer-payments through mobile wallets or mobile network operator wallets (MNO wallets) are the norm. With growing popularity of e-commerce in these countries comes the commercialisation of such wallets for B2C payment methods. There is a clear shift from P2P payments to B2C payments seen in many Asian, African and Latin American countries.

(Source: PPRO Group)

With a brief overview of end of year 2017, Andrew Boyle, CEO at LGB & Co., introduces Finance Monthly to 2018’s potential highlights, adding some thoughts on the prospects for crypto markets, new legislation and fintech.

Last year was an eventful year for financial markets. Globally, it was characterised by a continuation of the equity bull market, strongly performing debt markets and the surge in digital currencies. We expect this year to be equally exciting yet also challenging, with key issues likely to be whether the global bull market will run out of steam, whether disruption or collaboration will be the hallmark of Fintech’s impact on financial markets and if the significant increase in regulation will yield the benefits for which regulators had planned.

It was a banner 2017 for global equity markets, with the MSCI world index gaining 22.40% and reaching an all-time high. The US equity market was boosted by robust economic growth, strong rises in corporate profits, the Fed’s measured approach to unwinding QE and, latterly the potential of a fiscal stimulus from the much-anticipated tax reform bill. In the UK last year, the robust performance of the FTSE 100, was not only boosted by the weak pound since the Brexit vote, but was led by sector-wide factors that supported housebuilders thanks to the help to buy scheme, airlines, with the demise of Monarch and miners, as commodities enjoyed price rises against a weak dollar in a strong second half of the year.

Looking ahead to 2018, the global outlook for the markets might appear challenging. Valuations appear to be full, unwinding of QE may accelerate and bond markets are already showing signs of being spooked by rising inflation. However, it’s the first time since 2008 all major economies in the world are simultaneously growing, and despite being only the second week of the New Year, $2.1 trillion has already been added to the market capitalization of global equities. Growth still looks resilient and equity markets, particularly in the US, have been supported more by innovation in technology and innovative business models. With further advances of tech stocks underpinning the market, the outlook for equities looks more positive than a focus on the actions of central banks alone would imply.

Fintech has been heralded as a major force for disruption in financial markets. Yet looking forward it would appear that collaboration might be the model. Increased interest from large financial companies backing ‘robo’ investment – such as Aviva’s acquisition of Wealthify and Worldpay’s merger with Vantiv, illustrate this trend. Given this development, regulators are taking a closer interest in the impact of Fintech, keen to ensure if they are partnering with established financial institutions that there is no systemic risk to financial markets. One example of the interest from regulators and policy bodies is European Commission’s consultation on Fintech policy, potentially due out later this month.

Another key question is whether 2018 will see the ‘coming of age’ of cryptocurrencies. Bitcoin hit £12,000 in December last year, a month after the (CFTC) permitted bitcoin futures to be traded on two major US-based exchanges, the Chicago Mercantile Exchange (CME) and the CBOE Global Markets Exchange. Alongside widespread acceptance of cryptocurrency, this year may well see the BoE invest further in technology based on blockchain in order to strengthen its cyber security and potentially overhaul how customers pay for goods and services. It appears that the blockchain could lead to a change in the very concept of money, but also that the current speculative frenzy is overblown. The total value of the cryptocurrency market is at a new high of $770bn and a recent prediction from Saxo Bank states Bitcoin could reach as high as $60,000 in 2018 before it ‘inevitably crashes’.

One final thought is the impact of MiFID II - this presented financial services firms covered by its measures with some major challenges in the first weeks of 2018. Only 11 of the EU’s 28 member states have added flagship legislation into national laws and the sheer scale of legislation has raised questions that although far reaching, it is too ambitious and full compliance will remain difficult to achieve. Yet 2018 will not give companies any respite as both GDPR and PSD2 will be implemented this year. Roll on 2019 some regulation-fatigued financial firms may say.

In a recently published report, S&P Global Ratings said it sees political risk and international investor sentiment toward the UK as the key risks facing UK banks in 2018 (see UK Banks: What's On The Cards For 2018). This isn't new--the UK banking system has operated against a constant backdrop of elevated political risk since 2014 and during that period, they have made good progress toward improving their balance sheets. Achieving stronger returns on equity has proved more elusive, however.

As the Brexit talks rumble on, we expect them and the related parliamentary processes to dominate the newswires. The UK's minority government increases political risk, especially as the UK is unused to operating with a minority government. Our sovereign rating on the UK has a negative outlook and our economists forecast relatively low GDP growth of 1.0% in 2018. Nevertheless, we anticipate that economic and industry trends will be stable for the UK banking sector.

We see some possibility of unsupported group credit profiles (UGCPs) being revised upward in 2018, if balance sheet strength further improves and earnings prospects accelerate, but it is hard to imagine wholesale sector upgrades, given the political backdrop. Unless the political and economic environment deteriorates more sharply than expected, or banking groups experience management mishaps, we consider the likelihood of lower UGCPs to be limited.

Uncertainties related to Brexit negotiations, specifically regarding transitional arrangements, are likely to weigh on business confidence, while inflation is set to outpace pay growth for most of 2018. We forecast that the economy will grow more slowly in 2018 than in 2017 as these factors weigh on business investment and private consumption. In our baseline forecast, we expect that economic growth will moderately accelerate in 2019 and 2020 while the UK transitions to its new relationship with the EU in 2021.

Only a rating committee may determine a rating action and this report does not constitute a rating action.

(Source: S&P Global)

From AI to IP, with GDPR and cybersecurity in the midst, Karl Roe, VP Services & Cloud Solutions at Nuvias, tells Finance Monthly what’s in store for organisations using the cloud in 2018.

The Rise of AI

2018 will see Artificial Intelligence (AI) drive a transformational change among organisations and impact on cloud use.

ICT isn’t getting any simpler, and businesses are being forced to move faster as their customers’ requirements become more demanding. This is driving innovation in areas like AI, but automation of past processes won’t be enough to keep up with the “need for speed” in business agility.

We will see lots more AI projects and initiatives in 2018; it will be the cornerstone of change in automation of ICT. Proactive, automated, non-human decisions are now a necessity. Are the robots coming? Yes, they are – but we still need to develop the Intellectual Property (IP) to drive them.

IP Will Be Key

With emerging technologies like AI becoming more prominent in 2018, organisations are demanding bespoke software and solutions that solve their specific business problems.

As a result, companies are increasingly working with cloud service providers to gain a competitive advantage – this includes using public cloud providers to power their IP-centric solutions. Investment in infrastructure development is diminishing, replaced by a need for specific business-driven solutions that require unique software to bring these solutions to life.

From Partnering to Strategic Alliances

IP is the key, but many end users don’t have the time, resources or in-house skills to create their own unique solution that gives them the business advantage they require.

As such, they are forging long term business relationships with technology service providers who understand their need for change, and develop specific IP or software which utilises public cloud services, embraces AI, and most importantly which solves a business or specific customer problem.

Public cloud providers also need these strategic partner alliances to ensure there is a shorter time to value in moving workloads to the cloud, and providing solutions that move beyond IaaS (Infrastructure-as-a-Service) to fully utilising PaaS (Platform- as-a-Service).

PaaS as the Basis for Digital Transformation 

We are starting to see the SaaS (Software- as-a-Service) players now extending into PaaS in response to customer demand.

Customers that are using a SaaS kingpin like CRM want to extend that platform into other use cases and requirements. It’s been a long time coming but as the world moves to a cloud-first strategy, the complexity in integrated public clouds is driving companies to explore PaaS.

Secure Cloud Services & Cyber Security get Board Visibility

Cloud services have been a safe bet in the Boardroom in recent years, but now the question is, are they truly secure? Decisions to utilise cloud services have been a relatively easy Boardroom decision, due to their known cost and agility. But with more and more high-profile data breaches, questions are now being asked around cloud security at a Board level within businesses.

The damaging nature of cyber-attacks is now clearly in the line of sight of Board members. GDPR will also raise more questions at this level, making cyber security in the cloud a Board level priority.

Last week, the FTSE 100 saw a late upward rush as it closed at a new record high of 7,724.22 points. This was after a fresh record high at the end of the year, spurred by a rally in mining stocks and a healthcare burst. But how will FTSE kick off the year and will it sustain its consistency in record highs throughout 2018?

According to some sources, the success of FTSE in 2018 will largely depend on the outcome of Brexit negotiations, although a rise in the pound may make it a mixed blessing. Below Finance Monthly has heard Your Thoughts, and listed several comments from top industry experts on this matter.

Jordan Hiscott, Chief Trader, ayondo markets:

I believe the FTSE 100 will go above 8,000 in 2018. In part, this is due to the current political turmoil we are experiencing, with the incumbent UK government looking increasingly unstable as each week passes, an economy that seems to be lagging behind Europe on a relative basis, and the ongoing turbulence from Brexit.

However, all these factors are already known to investors and traders and so far, the FTSE has performed well despite these fears. For 2018, I believe the Brexit turmoil will increase dramatically as negotiations with Europe continue down an incredibly fractious route.

Craig Erlam, Senior Market Analyst, OANDA:

Two key factors contributing to the performance of the FTSE this year will be the global economy and movements in the pound. The improving global economic environment was an important driver of equity market performance in 2017 and many expect that to continue in 2018, with some potential headwinds having subsided over the last year. The FTSE 100 contains a large number of stocks that are global facing, rather than domestically reliant, and so the global economy is an important factor in its performance. Stronger economic performance is also typically associated with stronger commodity prices and with the FTSE having large exposure to these stocks, I would expect this to benefit the index.

The global exposure of the index also makes the FTSE sensitive to movements in the pound. After the Brexit vote, the FTSE continued to perform well as a weaker pound was favourable for earnings generated in other currencies. The pound has since gradually recovered in line with positive progress in Brexit negotiations and a more resilient UK economy. Should negotiations continue to make positive progress this may create a headwind for the index and offset some of the gains mentioned above. A negative turn for the negotiations though would likely weaken sterling and provide an additional positive for the index.

While many people are confident about the economy, Brexit negotiations are more uncertain and will have a significant impact on the index’s performance, as we have seen over the last 18 months.

Sophie Kennedy, Head of Research, EQ Investors:

We believe that the synchronised global growth and continued easy monetary policy should support global risk assets going forward. As such, equities should deliver a reasonable return over the next year, which will be the starting point for FTSE performance.

The deviation of FTSE performance around global equity performance will likely be a function of a few factors:

1. The level of sterling is extremely important. Many FTSE companies have very global revenue streams. As such, when sterling falls, foreign earnings are inflated. The level of sterling over the next year is likely to be a function of Brexit-negotiations, the result of which we are not attempting to forecast.
2. There are a number of large commodity producers in the FTSE. Their profits and share prices tend to rise and fall with the price of commodities. The oil market looks more balanced than it has previously and strong global growth should boost global commodity demand. However, we have already had a large rally since the middle of 2017, so upside is likely to be more muted.
3. The trajectory of the UK economy is also relevant, particularly for the smaller capitalisation parts of the market and sectors including housebuilders and utilities. We are not hugely positive on this point, on account of the real income squeeze and continued weak investment environment.

We feel that points 1 and 2 are neutral but point 3 is negative. As such, we expect the FTSE to deliver positive returns but likely underperform the MSCI World.

Tim Sambrook, Professor of Finance, Audencia Business School:

2017 ended the year strongly and is now around all-time highs. The 7% return and 4% dividend gain was better than most had hoped. But will this positive trend continue or will investors worry about the price?

The FTSE has performed strongly, because the global economy has done well. The FTSE is largely a collection of international conglomerates who happen to be based in the UK. The political mess has had little effect on the economic environment (fortunately!).

Strangely, a poor negotiation on Brexit will have a positive effect on the FTSE (if not the UK economy) as a large part of the earnings of the larger companies are overseas. Hence a fall in sterling will lead to a boost in earnings and hence push up the price of the FTSE.

Currently there is little reason to believe that the global economy, and hence corporate earnings, will not continue to do well in 2018. The current PE of the FTSE is not cheap at around the 18-20, and is without doubt above the long-term average of around 15-16. However, this is not excessive and could even support some negative surprises this year.

However, the underpinning of the current bull market has been dividend yields. The FTSE is currently offering 4% and is likely to increase over the coming year, with many of the large caps having excess liquidity. This is very attractive compared to other assets, particular as we shall be expecting higher rates in the future. The large number of income seekers are likely to increase the positions in the FTSE this year rather than reduce them.

Ron William, Senior Lecturer, London Academy of Trading:

The UK’s FTSE100 was reaching all-time record highs into the New Year, fuelled by a global wave of investor euphoria. 2018 was the best start to a year for S&P500 since 1999, marked by the Dow’s historic break above the psychological 25K handle.

All these technical new high breakouts are being supported by the highest level of upward earnings revisions since 2011, coupled with extreme levels of market optimism last seen at the peak of Black Monday 1987.

From a behavioural standpoint, it seems that analysts and investors are silencing tail-risk concerns in a precarious trade-off for fear of missing out on the party.

The “January Effect” is part of a tried and tested maxim that states “as the first week in January goes, so does the month”; and even more importantly, “as January goes, so does the year”. So our recommendation would be to see how January plays out as a potential barometer for the next 12 months.

However, keep in mind that we still live in known unknown times; some major markets have not even had a 5% setback in 16 months and the VIX index is at new record lows.

Back to the FTSE100, all eyes remain on the next glass ceiling: 8000. While there is an increasing probability that the market will achieve this historic price target, we must also apply prudent risk management as the asymmetric risk of a violent correction remains.

The long-term 200-day average, currently at 7422, is key. Only a sustained confirmation back under here would signal a major cliff-drop ahead from very high altitudes. Brexit tail risk will more than likely continue to weigh heavily on it.

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Investors now have little alternative but to support risk assets if they want to beat inflation, affirms one of the world’s largest independent financial advisory organisations.

The assertion from Tom Elliott, International Investment Strategist at deVere Group, comes as global stock markets enter 2018 with positive momentum, including the Dow Jones which has surpassed 25,000 for the first time in history.

Mr Elliott explains: “Market confidence is supported by a reasonably strong cyclical upswing in world GDP growth. This is being translated into corporate earnings growth, by a belief that central banks will not significantly tighten monetary policy unless justified by growth and inflation data, and by the U.S. corporate tax cuts announced in December which will boost Wall Street corporate earnings.

“In the face of continuing low interest rates and bond yields, investors now have little alternative but to support risk assets such as equities and non-core government bonds, if they want a yield that will beat inflation.”

An acronym is currently being popularised that describes how many investors see markets unfolding in 2018: MOTS, standing for ‘more of the same’. That is to say, solid returns for stock markets with continuing low volatility, and positive returns from investment grade corporate bonds.

“The risks to the MOTS scenario include central bank policy error, Trump turning America away from its traditional support for free trade, a credit crunch in the Chinese financial system and from geopolitics such as North Korea and the Middle East. However, as supporters of MOTS would argue, none of these risks are particularly new and they failed to de-rail markets in 2017,” confirms the strategist.

He continues: “We favour a long-term multi-asset approach to investing, whereby investors choose a suitable combination of global equities and bonds - depending on their risk profile and investment horizon - and leave the portfolio unchanged. Regular re-balancing ensures winners are sold and losers are bought – which financial history, and common sense, supports but which is so hard for us to do in practice.”

Mr Elliott goes on to say: “Looking forward to 2018, Japanese and emerging market stock markets appear to some commentators to offer most value, the U.S. less so. The Japanese economy, which grew at an annualised rate of 1.4% in the third quarter 2017 (despite a shrinking population), continues to benefit from a weak yen and the upturn in global demand for its exports. Fiscal reform, in particular lower corporate tax rates for companies that increase wages by 3% or more, comes into effect in April. It is hoped that this will lead to improvements in household demand growth, which has been weak in recent years. Emerging market equities continue to look undervalued relative to their developed market peers on most valuation measures, despite their outperformance in 2017.

“Wall Street is the most overvalued of the major stock markets, with the attractiveness of equities against bonds diminishing as Treasury yields creep up. However, the increase in yields is likely to be modest and U.S. corporate earnings growth will remain strong, limiting any pull-back in share prices. The weak dollar boosts export earnings, while strong consumer confidence supports domestic-focused sectors. Tax cuts will be a net benefit to U.S. corporate earnings, but the impact of changes to the tax code on individual sectors is as yet unpredictable. Fourth quarter earnings statements and outlook comments, from mid-January, will hopefully offer clues.”

Mr Elliott is not so confident about fixed income. He concludes: “Once again we begin the year with commentators generally nervous of bonds, fearing that an inflation problem is around the corner. Some fear that central banks will tighten monetary policy faster than is priced into the market in an accelerated effort to ‘normalise’ policy.

“It seems prudent to heed such warnings, even while acknowledging that the fear of imminent inflation has been voiced by monetarist hawks – and proved wrong- ever since central bank’s policies of quantitative easing and ultra-low interest rates began nearly 10 years ago. This suggests favouring short duration core government bonds, since the cash can be re-invested in a few years in higher bond yields.”

(Source: deVere Group)

If you’re feeling the pinch after an expensive festive season, now is the perfect time to start revising your current finances and begin to make plans for the new year. Managing your finances more effectively is easier than you think, with just a few small changes, you can put yourself in a much stronger financial position to face the year ahead.

1. Organise your Current Finances

The best way to start your new plan is to organise and understand your current finances. It’s a good idea to set out clearly what you earn, what you owe, what you save, and what you spend. This way, you will be able to work out exactly what you spend and what you have spare each month.

You can do this easily by printing out your last few months’ bank statements as they will show all of your income and expenditure. Then, it is a good idea to highlight all of the expenses you can’t save on, like rent/mortgage payments and bills, so you can see clearly what your total ‘certain’ costs are.

Then, do the same with all of your other expenses; living costs, financial products (insurances), travel and leisure, so you can give yourself a full understanding on where your money goes each month. Once you know this, you will be able to start sorting out areas where you can save money.

2. Cancel Unused Subscriptions/Memberships

It’s not unusual to have a few expenses that manage to keep going unnoticed each month, especially when they automatically leave your account in a direct debit. I am guilty myself of having a 6 month gym contract that was never used!

If you’ve noticed that you have a few expenses, other examples could be magazine subscriptions that you no longer read or monthly subscription boxes, you will be surprised at how much they can add up to over a few months. Being realistic and strict with yourself and only paying for the things you actually use and enjoy will cut down a lot of money wastage.

3. Change Vehicle Insurance Providers

Most of us own a vehicle of some kind which needs insurance paid for on a monthly basis (if you choose to pay it monthly, rather than annually). A lot of people stick with the same insurance provider year after year, simply because it’s the easiest option. What a lot of people don’t know is that you can often get a cheaper premium if you switch to a different provider, especially if your financial circumstances have changed.

Some providers will offer attractive deals to new customers, or, they may just simply be cheaper because they look at things differently – and you may have never heard of them! Using comparison sites such as Gocomapre.com is often the best way to find the cheapest deals.

You can switch to a new provider at any time, you don’t have to wait for your current policy to expire.

I would recommend checking for better deals on a yearly basis, especially if you haven’t made any claims on your insurance throughout the year. But you should also check when you have a change in personal or financial circumstances, such as:

• Marital Status
  • Home ownership
  • Education
  • Employment
  • New car
  • Credit score improvement

I can’t guarantee that any of these will make massive changes to your rates, but it’s definitely worth a look.

4. Balance Transfer your Credit Card

If you have some debt build up on your credit cards which you’re paying a lot of interest on, then it might be worth transferring some, or all, of the balance onto a different credit card which has cheaper rates. You can find cards that are specifically designed for this purpose called a balance transfer card.

A lot of balance transfer cards offer 0% interest for an introductory period (sometimes up to 6 or 9 months) which will benefit you as you will be able to start paying off the actual credit card balance, not just the interest.

After the 0% introductory period, the rates will increase to the standard rate, so make sure you know what this will be, and that it is cheaper than your current card.

Top Tips:

• Try not to make any purchases on the credit card you have transferred the balance to, as you will normally be charged the standard credit card rate (unless you have a deal on that too) which will just be adding to the debt you already have.
• You will normally be charged a fee for the processing costs when transferring the balance which may seem expensive upfront, so, it is important to work out how much you will be saving in the long-run by paying less interest, and whether this is more than the total fees. The fee will normally depend on the amount you are transferring.
• Most credit card providers will try to sell you fraud protection and other types of credit card insurance. The benefits of this is unlikely to be worth the extra money as you are already protected, to a certain extent, under section 75 of the Consumer Credit Act. So, only spend the money if you are 100% sure that the extra protection is something you need.

5. Change your Bank Account

Some banks charge a monthly fee for some types of bank accounts, If this is something you are paying, it will be beneficial to have a look around to see what other banks are offering. You may find a bank offering cheaper fees, or none at all, depending on what type of account you want to open.

Some banks will offer new customers attractive interest rates, as well as some even offering you a bonus upfront for simply opening an account with them.

This may not make you any huge savings upfront, but would be beneficial to you in the long-run if you are able to gain better interest and cheaper fees.

6. Switch Home Phone and Broadband Suppliers

You may find that if you stick with your current home phone and broadband provider, your bills could increase if you just let your contract roll over. However, switching providers is likely to give you much cheaper rates, saving you money all year on household bills. Using comparison sites will show you which providers will be able to offer you the cheapest price for your usage - make sure you only accept a deal which covers what you need so don’t end up over paying! Your current provider will be able to tell you this information.

The length of time it will take to switch will depend on what providers you are switching from and to – but you shouldn’t be without connection for long, if at all, so the small inconvenience will be worth the saving.

If you are still unsure about switching, try phoning your current provider instead. If you’re lucky, you should be able to haggle with them to bring down your price a bit – especially if you are overpaying for your usage anyway.

7. Pay Yourself First

I think a really good method of saving money is to set up a direct debit from your current account into a savings account for the same day as when you get paid each month. You should set it to an amount that you know you can afford so you will be less likely to notice that the money has gone. By doing this, you will be saving money without even having to think about it.

This can be an emergency fund for unexpected expenses, for example car or home repairs, which could end up putting you in debt if you don’t have the money readily available and need to take out a loan to cover the cost.

8. Check your Mobile Phone Contract

Mobile phone contracts can be very expensive, especially if you have a brand new model of phone. However, a lot of us end up paying for more than we actually use. There’s no point taking out a contract with an ‘unlimited data’ deal and paying more for something if you’re not going to use it. If you contact your provider, they will be able to tell you exactly what your mobile phone usage is; including minutes, texts and data. Then you will be able to choose a contract that’s tailored to you.

Also, if you are someone who uses your mobile phone more rarely, it might be worth thinking about a pay-as-you-go deal instead of a monthly contract. This way, you will only be paying for exactly what you use each month which should make it much cheaper for you. It will also mean you are not tied into a contract so you can change your phone and switch to a contract, if you think that would be better for you, whenever you want.

9. Text Alerts from your Bank

A good way to keep track of your spending is to set up text alerts with your bank. By doing this you will get notified when you either; get close to your limit (when your balance falls below £50), you have started using your overdraft and you are being charged, if you don’t have enough money in your account to pay a standing order or direct debit (they will give you time to transfer money into your account, if you can), and when your balance has gone down to £0. Doing this will enable you to effortlessly keep an eye on your accounts and keep track of your spending. It will also prevent you from going into your overdraft without realising, saving you from facing charges.

Most major banks offer these services and you can set it up through your online banking account, in branch, or over the phone.

(This information was taken from Lloyds bank, alternative banks may differ).

Bigger Steps…

If you're looking into making some even bigger changes to your finances, there are a couple of steps you can take:

1. Re-mortgaging

Re-mortgaging your home could seem like a huge step to take, but, it could potentially make you huge savings if you find the right deal.

If you have been on the same variable rate mortgage for a long period of time, you may not be paying the best interest rates available to you. By re-mortgaging with a different lender, you will be likely to benefit from cheaper interest rates and various introductory deals. Most lenders offer deals for the first 2-5 years of the loan term, whether that’s a fixed, capped, or discounted rate. Once this period has ended, the interest rates will go back to the lender’s standard variable rate, so, of course you want to make sure you choose a lender that has a cheaper rate than your current one.

There a few upfront costs involved with re-mortgaging your home, such as exit and administration fees, but if you compare the costs with the money you will be saving on interest, it should prove cheaper in the long-run.

Or, if you don’t want to go through the process of re-mortgaging, it will be worth contacting your current lender and asking them to lower their rates for you, especially if you have already found cheaper rates elsewhere. Not all lenders will do this for you, but most will want to keep you as a customer so will probably try to help.

It will be worth getting independent financial advice if this is something you are looking to do. This will make sure you are doing the right thing and that you are getting the best deal.

2. Get a Lodger

This may not always be a popular option with a lot of people, but if you have a spare room, it may be worth thinking about getting in a lodger who will pay you monthly rent. You could have a friend who’s looking for a place to stay, or you can publicly advertise the room – it depends what you’re comfortable with.

If you do this, the rent would be an extra source of income for you, which should help to cover the cost of bills and food.

(Source: KIS Bridging Loans)

The Dow just soared through yet another milestone, crossing 25,000 for the first time. CNN's Christine Romans explains what's driving gains.

With the recent interest rate rise, from mortgages to savings, the public is still awaiting movement in the financial sphere. Below Paul Richards, Chairman of Insignis Cash Solutions, explains to Finance Monthly what 2018 holds for savers.

The Bank of England November rate rise has triggered a waiting game among banks. The government’s move to extend the rise to NS&I savers puts more pressure on competitors to do the same, but savers have still only seen the full benefit with a handful of banks. Most banks are still waiting to see what competitors do, or passing on only a fraction of the rise.

Some economic commentators point to two further interest rate rises in 2018, but protracted Brexit negotiations could delay this. If the Bank of England hikes rates again, it will once more be the government’s decision on NS&I rates that influences whether other banks will follow.

No savings provider wants to pay more interest than they need to, as it has a direct impact on their profitability. Margins have been compressed heavily since the global finance crisis and banks don’t want to see them fall further. Challengers are more hungry to grow their balance sheets via retail deposits, so we’ll likely continue to see better rates from these players than the traditional larger banks.

February 2018 will see the end of the £100 billion term funding scheme, a source of cheap borrowing for banks. Once this scheme is closed, appetite for retail deposits will increase, prompting more competitive rates in the market. Longer term the impact will be even more significant, banks have four years to repay money to the scheme, and will need to rely on retail deposits for some of these funds.

For several years a large amount of banks’ budgets and human resources have been dedicated to managing regulatory change. This drain has likely prompted unintended consequences for consumers; if banks hadn’t had to spend so much money on implementing new regulation, would we have seen the same level of branch closures?

But there are huge benefits from regulation, driving increased consumer protection and access to better deals. Open Banking and PSD2 are the most interesting areas to watch - both open up, with consumer consent, bank transaction data to power new financial tools. These will help people better manage their money and access the right deals for them. A wide range of fintechs across the UK, including Insignis, are working hard to develop new solutions and over time consumers will feel a real benefit to their day-to-day lives.

Some banks are further advanced with their Open Banking plans than others, and there are challenges to grapple in terms of data management and security; however, there’s no question that 2018 will be a year of huge advances that give consumers more control over how they manage their money.

Below Finance Monthly hears from Managing Director of Equiniti Credit Services, Richard Carter, who discusses the impact of digitalization on the lending market, rising interest rates and his predictions for the 2018 landscape.

Digital fluency and a thirst for convenience are making the UK’s borrowers more capricious and cost-sensitive than ever, says Richard Carter, Managing Director, Equiniti Credit Services, in this collection of predictions for 2018. Interest rate rises, and new regulations will add fuel to this fire next year, and lenders that can’t keep up will get burned.

1. Lowest price wins

In the digitised age of credit price comparison sites, brand loyalty equals bought loyalty. In 2018, lenders must earn their custom by delivering market-beating products. As interest rates continue to rise, the lenders that can drive down the cost of credit stand to prosper the most. Simply reducing margins, however, makes little business sense. But in a rising market there is a balance to be struck between protecting profit and increasing sales. Some may be willing to take a short term hit to capitalise on the rising market conditions, taking the view that volume sales justify smaller margins.

Adoption of automated and agile credit technologies will help lenders to drive down costs, reducing time-to-revenue for new products and enabling savings to be passed on to the customer in the form of more competitive rates.

2. Lenders adjust to curbing enthusiasm

The rise in interest rates are also likely to have a knock-on effect on what borrowers use credit for.

Recent research from Equiniti Credit Services[1] indicates that borrowers’ use of credit is split equally between funding aspirational items such as cars and holidays, and managing existing debt. To offset rising rates, 2018 will see lenders adjust their standard payment terms, allowing monthly repayments to remain consistent. It remains to be seen whether credit will continue to fund aspirational items at the same rate, especially since the falling pound has already driven up the cost of foreign travel and overseas goods considerably.

3. Application declines will no longer mean ‘no’

Regardless of whether lenders adjust their repayment terms, rate rises will still have an impact on affordability assessments, meaning borderline candidates will be excluded from products they once qualified for. This will trigger an increase in declined credit applications, before customer expectations have time to recalibrate.

In 2018, lenders will start to turn this to their advantage. Instead of abandoning the customer at the point of decline, they can automatically identify suitable alternatives, ideally from their own portfolio, or from other lenders. Doing so enables them to protect their relationship and ensures their customer doesn’t tarnish their credit score from repeated declined applications. Agile credit technologies hold the key to this win-win scenario, by providing a whole of market view and matching applicants to alternative loan products instantly, at the point of decline.

In a market where consumers can identify an alternative provider in a split second via a comparison site the ability of a lender to hold their attention throughout a decline and then convert them to an alternative product is a valuable coup.

4. Contact centres will need to be rethought

Equiniti’s 2014 research report revealed that 61% of consumers preferred a telephone call or face to face meeting to explore a loan application. In 2017, that figure has dropped to just 48%. We can expect this trend to continue next year, reflecting a growing desire for self-service applications. In response lenders should be rethinking their use of contact centre resources next year. As simple queries are increasingly resolved online, the role of contact centre staff will elevate to handle more complex queries, and lenders must prepare their resources accordingly. Outsourcing this function to a dedicated specialist partner is a cost effective and efficient way to manage both sporadic call volumes and complex queries, and ensures all calls are handled by skilled, FCA accredited individuals.

5. PSD2 will change everything

Driven by the advent of the Second Payment Services Directive (PSD2) in January, APIs are being opened up across the banking industry, enabling customer-permitted apps and services to access never-before-seen levels of transaction data. Lenders must embrace this new world. Here, data is the new currency, and the combination of customer-centricity and low cost is the key to attracting – and keeping - new customers. The regulation amounts to EU-sponsored digital transformation in financial services, and outsourcers will play a crucial role in helping lenders keep up, stay relevant and harness their use of new data sources to learn more about their customers and get ahead of the competition.

6. Social media data begins to play a part in credit decision making

Thanks to digitalization, the sharp decline in verbal and face-to-face communication means lenders must seek alternative ways to get a sense of who they are dealing with. Social media platforms provide a window into borrower’s lives and give lenders a data source that can be used to contribute to their assessment of an applicant. Sure, social media data will never determine whether to grant or decline a credit application, but as automation and AI technologies continue to be applied to this space in 2018, there is no reason why a lender shouldn’t include social media data in the mix.

[1] https://equiniti.com/news-and-views/eq-views/great-expectations-the-demanding-market-for-credit/