St James Place : Swansong

When the Roman poet Juvenal used black swans as a metaphor for the impossible, it was because he thought they didn't exist, leading to the phrase: a black swan event. But Juvenal had not been to Australia, where Europeans would encounter them for the first time in 1697. The story is told in the 2007 bestseller The Black Swan, by Nassim Nicholas Taleb, a statistician and thinker widely credited with predicting the global financial crisis - itself a black swan event. Last year the metaphorical swans made their return; except this time their destination was politics.

Ladbrokes had offered 5/1 odds on the UK voting to leave the European Union and 150/1 odds on the US electing Donald Trump as president. (Fans of English football will note that it had also offered 5,000/1 odds on Leicester City winning the Premier League in 2016.) Markets were taken by surprise too but, despite plenty of grim forecasts, no doomsday scenario materialised. Instead, equity investors enjoyed a stellar year, thanks in no small part to how politics moved the markets.

This week's bulletin also includes:

• The unexpected Brexit vote and election of Donald Trump were the dominant events on markets in 2016.
• The S&P 500 and FTSE 100 both performed strongly, helped by currency fluctuations and a rising oil price.
• Several leading central banks adopted negative interest rates but in December the Fed raised rates by 0.25%.
• Eurozone growth improved, Italy's prime minister lost a referendum on reform, and troubles with its banks persisted.

View this week's Market Bulletin, which contains thoughts and opinions of St. James's Place and our range of investment managers on the key issues affecting investors.

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