As the year draws to a close, I would like to take the time to share some observations on market activity in 2017. It has been a largely uneventful year in terms of financial market shocks. The backdrop can be characterised by modest economic growth in developed nations, low interest rates, low inflation, a grind higher in stock prices, continued strength in property markets and a strong Euro. Asset price volatility has been running at lows not seen for many years, a situation brought about at least in part by the continued extreme low level of interest rates.



OECD (2017), Long-term interest rates (indicator). doi: 10.1787/662d712c-en (Accessed on 09 December 2017)

2017 Investment Returns

2017 has been another year of mixed but positive stock market returns, with the strongest returns evident in the US and Emerging Markets as we conclude the ninth year of an equity bull market.

S&P500 $                              +16.5%
Euro STOXX 600 €             +  7.7%
FTSE 100 £                           +  2.7%

(YTD 8th December in own currency)

Perhaps the biggest theme for Euro based investors has been the strength of the currency vs. international peers. This has resulted in lower returns for investments in the US & UK when converted back to EUR, and led to discussions about the merits of hedging international equity portfolios for currency risk. This is a topic we covered in a blog post recently. Click here to check it out.

Government bond returns have been very low once again as rates remain at or close to all-time lows, and Central Banks continue with their Quantative easing (QE) policies. The Irish 10yr government bond offers an annual return of just 0.50% if held to maturity, and shorter dated bonds remain negative yielding in many cases. QE is slowly being reduced in both the US and Europe but it will likely be at a slow pace. Investors need to be conscious of the interest rate risk in their bond holdings, and realise that returns will likely remain very low at best for the forseeable future.

As usual at the end of another financial year, we suggest taking the time to review pension and other investments. It’s worth considering your asset allocation, and whether your risk profile may have changed since initial implementation.


Interest Rates

European interest rates have remained at zero in 2017, great for those on tracker mortgages and terrible for those relying on deposit interest or fixed income investments. European economic growth looks better now than one year ago, but if inflation remains below the ECB’s target it does not seem likely that an interest rate rise is on the horizon for some time to come.

In the US the Federal Reserve raised rates by 0.25% twice so far in 2017 (March and June) and is expected to hike once more by year end, to finish with a policy rate in a range of 1.25%-1.50%. The Fed is expected to continue it’s rate hiking policy in 2018 under new chair Jay Powell.  As always this will depend on the incoming data on growth and inflation. Like it or not,  it will also depend to some extent on the performance of the stock market.

One thing to watch closely is the difference between the US government 2yr and 10yr bond yields. That differential has been narrowing sharply (known as ‘curve flattening’). If you look at the graph of this relationship since the 1970s you will see that each of the five times in the past that this differential has been negative (2yr rate higher than 10yr rate) it has preceded a US recession (shaded bars)


Fedeal Reserve Bank of St. Louis, 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity [T10Y2YM], retrieved from FRED, Federal Reserve Bank of St. Louis;, December 7, 2017.


The big financial market story at the end of 2017 is Bitcoin and crypto currencies generally. Bitcoin traded above $17k on 8th December. One month ago it was at $7k and one year ago at $1k. Bulls will tell you it’s worth $100k or more. Bears will tell you it’s worth $0.

How should one value bitcoin – is this speculation or investment? Although I have little doubt that Blockchain technology is a game changer, Blockchain is about much more than just bitcoin. There will be a lot of ink spilled on the topic in coming months and years, but for now all I can say is that recent price action is reminiscent of dotcom mania, and that nothing goes up in a straight line forever.



In 2017 we had some positive news regarding the Irish State pension entitlement for those who may have left the workforce for a time. Voluntary PRSI contributions can now be made up to five years after ceasing payments (previously one year). Details can be found here.

More broadly the looming Pension crisis remains an enormous problem that no government has dared to tackle. The State will simply not be able to afford to keep the State (previously old age) pension in it’s current form in the long term.

In many cases company pension plans remain significantly underfunded in spite of strong investment returns in recent years.

The clear message is that each individual needs to take control of their own retirement provision and take advantage of generous tax benefits for doing so.


Financial Market Regulation – What it means for you

2018 will see the introduction of a wide range of new European financial market regulations. This will kick off with ‘MIFID2’ in January with further regulatory updates later in the year. The intention is to ensure fairer, safer and more efficient markets and to increase transparency. It will however result in a much heavier compliance workload and more paperwork.

We do not have full information yet about the impact on the advisory business in Ireland. However as a fee based Independent Financial Adviser we welcome the expected improvement in transparency for clients. Our firm believes that charging a pre-agreed fee for professional on-going financial planning and advice offers a better outcome for clients compared to opaque commission based remuneration.


Financial Planning

“To earn their keep, advisers should focus their clients not on “picking winners” but on factors such as sound asset allocation, broad diversification, low cost, tax-efficiency, simplicity, and even estate planning.” – Jack Bogle, “The Clash of the Cultures”


Adding to Jack Bogle’s quote, we would say that anybody who cares about their financial future should have a robust and detailed financial plan. The plan should be clearly documented and outline current/future income and expenditure. It should include saving & investment plans for specific future events, retirement planning and family financial protection.

This should be one of the primary reasons for speaking with an Independent Financial Adviser, who can put such a plan in place and review it regularly.

Ardbrack Financial will be introducing an updated Financial Planning product for new and existing clients in early 2018. This state-of-the-art software will offer detailed cashflow modeling, scenario analysis and help to build robust lifetime financial plans.

Further information will follow on our website in the new year.


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Finally I would like to wish you and your family a happy Christmas and a healthy and prosperous 2018.

John McWey


Ardbrack Financial Ltd | 021-4773833 | |

Disclaimer: The content of this article is for general information purposes only. It does not constitute investment advice as it does not take into account the investment objectives, knowledge and experience or financial situation of any particular person or persons. You are advised to obtain professional advice suitable to your own individual circumstances. Ardbrack Financial Limited makes no representations as to the accuracy, validity or completeness of the information contained herein and will not be held liable for any errors or omissions.

Ardbrack Financial Ltd is regulated by the Central Bank of Ireland