World Markets

Will January 2017 follow tradition and be another ‘reversal’ month for markets?

January’s always been good for ‘surprises’: Pro
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January’s always been good for ‘surprises’: Pro

As 2016 draws to a close, investors and analysts around the world will be looking ahead to what the coming year could bring for markets.

So will the start of next year bring joy or dismay? According to one investment director, she wouldn't be surprised if January itself was a month for "reversals".

"January's always good for surprises," Sonja Laud, investment director of global multi-asset group at Baring Asset Management, told CNBC on Friday.

"Before we really try to look for what's ahead next year, I think it's important to really look at the individual input factors, (like) the economy, valuation levels and obviously political risk."

"I think there, the picture in itself is reasonably constructive and as such, I would not be too put off if we should see a reversal month in January."

Laud noted that investors should be "mindful" heading into 2017, as there had been a lot of excitement already seen into year end, and therefore investors should err on the side of caution to see if January could hold a few "negative surprises".

According to Laud, January has historically being seen as a "reversal" month; for instance while the end of 2015 proved somewhat positive for indexes such as the pan-European STOXX 600 and the Dow Jones Industrial Average, both indexes saw a sharp downturn during January 2016.

Therefore, Laud said she wouldn't be surprised if some sort of reversal was seen in asset classes that have suffered heading into the year-end too, such as gold or those which are interest rate sensitive.


Growth outlook for UK slightly worse than peers: Barings
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Growth outlook for UK slightly worse than peers: Barings

While the economic side of the equation appears to have a "reasonably constructive backdrop" heading into 2017, Laud said there is political risk and uncertainty ahead, such as Donald Trump's inauguration in January, along with important elections in Europe.

"If we learnt a lesson from 2016 is that it is very difficult to judge the outcome and (therefore) position accordingly, because market reaction and the outcome normally did not go hand in hand with what spectators had expected."

Overall, Laud added that January was a "good month to watch", as not only has it historically been seen as a reversal month, but it's a good starting point when it comes to looking at positioning.

"I think it's a good starting point to look at your positions, where you want to position, assess your own view on political risk versus the constructive economic backdrop and then you can decide where you need to [head] or (potentially) loosen up a bit, because it could be a good month to sell as well."

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