There is always one thing you can predict about the last week before Christmas - everybody will be making predictions.
Oh yes there are plenty of people lining up already to tell us that 2006 will be the year when “European and Japanese equities will lead the performance pack” despite an already strong set of returns during 2005.”
This comes from F&C Asset Management which says it “remains broadly positive on equities”, but wants to warn us that the “risks are rising” and “better value is emerging once again in government bonds.”
Meanwhile the housing industry has been out in force to tell us the outlook for 2006 is “overwhelmingly positive.” Mortgage Trust’s December Buy-to-Let Intermediary Forecast claims “64% of intermediaries expect to write more business over the whole of 2006 than in 2005, and 29% expect to write ‘significantly’ more.” And “The outlook for 2006 is good, even in comparison with the increase in business volumes experienced in 2005.”
Apparently 43% of intermediaries surveyed felt buy-to-let business volumes were at least 10% higher in 2005 than in 2004, and 7% said they had experienced volume growth of above 50%.
Then there is SmartNewHomes.com telling us: “The UK housing market has suffered throughout 2005 but will see a burst of activity in Spring 2006 before returning to steady sustainable growth with an average 2% price inflation over the year.”
And finally John Charcol is predicting house price growth of 5.5% by the end 2006 and the tantalising possibility that the Bank of England’s Monetary Policy Committee could lower the base interest rate by as much as 0.75% by the end of the year.
Oddly quiet has been the pensions industry. Is this because this is far too sensible a corner of the market to make predictions about 2006, or because this is probably the only corner of financial services where anything significantly dramatic could happen and so making predictions could leave one with a certain amount of egg on one’s face?
After all, look at the past year and all the talk about self-invested personal pensions (Sipps). One suspects that Gordon Brown has not received very many Christmas cards this year from the Pensions Industry. It is very doubtful he has received one from Standard Life at any rate.
To be fair the effects of Brown’s rather large U-turn on Sipps probably have not yet been felt by providers and intermediaries alike yet. Thus making predictions could be a bit of a tricky business given all the predictions made prior to the pre-Budget report announcement about Sipps. Given its recent history the pensions industry as a whole could be forgiven for wanting to play it safe.
Whatever the reason pensions are likely to be a significant source of news given the changes that are to come. There is, of course, A-Day, although no-one still seems to know what the “A” in “A-Day” actually stands for, maybe we should try and simplify that before we tackle the pensions bit?
Standard Life’s demutualisation also takes place at the beginning of the year. Similarly, does Equitable Life’s face a potential break-up thanks to the disastrous legal action against its former directors and auditor Ernst & Young? More generally there is likely to be more on MiFID; European legislation on cross border mortgage lending; and lets not forget further policing of the perimeter on mortgages and general insurance by the Financial Services Authority. There is also a new Finance Bill; probably a new Pensions Bill; minister of state for pension reform Stephen Timm’s response to the Turner Report; ongoing changes to Tax Credit rules; the continuing issue of public sector pensions and the funding of local authority employees; the link between Council Tax and house prices and whether that link should be broken; and the start of the baby boomer generation going into retirement.
These are the things we know are going to happen. Or at least these are the things we know are supposed to be happening in 2006. And how many of us actually listen to predictions anyway. After all, this time last year some doomsayers were predicting the housing market would crash because it had become over-heated yet no-one foresaw the rather larger hike in oil prices. Neither has led to an economic collapse and while growth in the economy has dropped somewhat we could not expect things to continue as they were forever. And by the same token we are experiencing a slowdown, not a meltdown - well, not yet anyway.
So, as much as we all like to gaze into our crystal balls at this time of year - in much the same way as some like to read their horoscopes - and predict that next year will be better, would it not be much simpler if we just got on with it?IFAonline
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