6 Key Events That Could Shape Markets In 2017

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2016 played host to the unexpected with the U.S. presidential election and Brexit vote. 2017 will bring its own events that could have consequences for global markets.

As we prepare for the year ahead, we highlight some of the key events to keep an eye on in the first half of 2017, both in the U.S. and around the world. It is, of course, impossible to know how these events will play out, but being aware of the potential for volatility should help investors prepare for both the risks and the opportunities that could unfold.

Key Events – Jan. 1: Euro anniversary

The start of the year marks the 15th anniversary of the full launch of the euro. Prior to January 2002, the euro had existed only as a virtual currency. The combination of Brexit and a sluggish economic outlook points to a European Union that is facing some serious headwinds. While there is still a strong political commitment to the EU in most member countries, some reforms may have to be made before long.

Key Events – Jan. 20: U.S. presidential inauguration

Donald Trump’s election victory confounded expectations, although leaders on both sides of the aisle appear committed to ensuring a calm transition process. The policy priorities Trump sets out for his first 100 days in office may increase or decrease market volatility, depending on how far-reaching his aims are in terms of immigration, domestic spending, taxation, international trade and other matters.

Key Events – March 26: Hong Kong elections

Elections in Hong Kong, the autonomous Chinese territory that serves as an important economic hub in Asia, are often controversial because of Beijing’s efforts to control the outcome. The election for a new chief executive — the head of the city’s government — could well follow that familiar pattern, particularly if the authorities opt to clamp down heavily on signs of dissent or pro-democracy activism during the campaign or once the result has been announced.

Key Events – March 31: Brexit negotiations

The U.K. government has said it plans to trigger the Brexit process before the end of March. That will mark the start of formal negotiations on the U.K.’s exit from the EU. Depending on how the process is managed, those negotiations could help bring some stability to the U.K. economy, but they could also trigger further bouts of volatility.

April 23: French presidential election

The unpopular François Hollande has decided not to run for reelection. His successor as head of the Socialist party is likely to face a stern test from former Prime Minister François Fillon, the right-wing Republican party candidate. The performance of the far-right Front National will also be watched closely — with many expecting its leader Marine Le Pen to make it to a final run-off vote but fall at that final hurdle. Following Brexit and the Trump victory, the chances of an upset appear higher than in any other recent French election.

Key Events – May 19: Iranian presidential election

Iran’s uneasy relationship with the West is a key area of uncertainty in the wider Middle East region, despite the nuclear deal that came into force in early 2016. Tensions could rise during and after Iran’s presidential election in May. If incumbent Hassan Rouhani is reelected, there is a strong chance that Tehran will try to build on the foundations of the deal. But Rouhani could face a tough election cycle against more conservative opponents who question the nuclear deal’s economic benefits to Iran.

The second half of 2017 will feature other key events such as German parliamentary elections in October, when Chancellor Angela Merkel, Europe’s most powerful political leader, will likely be fighting to secure another term. In Asia, China’s ruling Communist Party is due to hold a quinquennial (every fifth year) national congress in October or November to choose party leaders for the next five years.

Bottom line

We’ve touched on six factors that could move markets this year, but other unpredictable events are sure to occur. Uncertainty is a given when looking at the future, but investors can at least prepare for what might happen — it doesn’t remove risk, but it can make it easier to deal with.

Article by Columbia Threadneedle Investment

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