Investing.com - UBS looks forward to the new year from the perspective of the UK economy, having rounded up the current year.
Despite many forecasts to the contrary, the country “survived” the election and the ushering in of the first Labour government in 14 years, anal;ysts at the Swiss bank said, in a note dated Dec. 16.
“For UK investors, the news hasn’t been all bad either. To be sure, the UK market has underperformed the US, which has benefited from much higher exposure to fast-growing technology-focused sectors. But the FTSE has still returned over 7% this year, which, when you add the market’s healthy yield, rises comfortably into double digits,” UBS said.
Gilts haven’t benefited from falling rates as much as we hoped, but an investor in a 5-year gilt this year wouldn’t have lost much, while even the pound hasn’t done as badly as many thought it would.
There are a few thoughts that can be taken forward into next year, the Swiss bank added.
“Yet again, the mood in the UK is seemingly glum, helped in no small part by the long-awaited budget. It would be hard to come up with a budget that was less growth- and investment-friendly, but that said, the spending that was announced should help the economy grow next year. So, deciding not to invest for fears of a recession is likely to be as successful a strategy next year as it was this,” UBS said.
The lesson we should all take from this year is to follow what politicians do, not what they say. Investing based on campaign pledges would have done more harm than good in 2024.
“Finally, don’t confuse the market with the economy. The UK economy should do okay, but it won’t be the best out there. But that doesn’t mean that the FTSE, with its focus in other parts of the world, can’t deliver positive returns, especially when taking into account dividends,” UBS added.
Interest rates will fall, although maybe less quickly than in other regions, so getting cash to work is likely to be the right strategy in 2025, as it has been this year.