As we enter 2013, now is a key time for Financial Planners and investment advisers to be considering where they'll invest their clients' money in 2013 and beyond. While Financial Planners sensibly take a long- term investment focus, there is no doubt they will still be influenced by investment trends and forecasts for the coming year and the impact of those trends on the next five to ten years. Looking back, 2012 was a particularly eventful year for investors with leadership elections in America and China, the Eurozone crisis worsening, riots in Greece and Spain and the Olympics in the UK.
Danny Cox CFP^CM, head of advice for Hargreaves Lansdown, said: "The last few years have been unconventional and 2012 was no exception. The markets have proved more positive and the global economy seems to be pulling very slowly back towards recovery. However, it is a case of a few steps forwards then a couple of steps back and we are by no means out of the woods yet." So will 2013 prove to be as momentous as 2012 and where should investors look to get the maximum value for clients? We look at some key markets.

AMERICA
One of the most pressing and imminent challenges is the so-called fiscal cliff in America. Since the re- election of President Obama in early November, the focus of the markets has been on this matter and how it will be resolved. The fiscal cliff is the £380bn combination of automatic tax rises and spending cuts set to be implemented by Mr Obama on 1 January 2013. It was brought about by the expiration of Bush-era tax cuts which reduced income and investment taxes and secondly by automatic spending cuts to government programmes such as defence and education. If nothing is done to prevent these measures automatically coming into effect, the US deficit will be about £380bn smaller in 2013. Figures from JP Morgan suggested the deficit could fall from seven per cent of GDP to less than four per cent in 2013. These changes could send America back into recession as it could cut household incomes and push up unemployment.
However, the first meetings began on 16 November and signs are positive that both parties are willing to compromise. The fact that Democratic Mr Obama still has to contend with a Republican House of Representatives has hampered his plans but economists believe he is more confident and assured of his proposals than Mitt Romney would have been.
Critics had decried Mr Romney as using empty rhetoric and of not having fully thought-through his plans which would have already been delayed by a year to allow Mr Romney time to implement his own fiscal strategy. However, there is considerable doubt over whether Mr Obama will implement the changes or if they will be delayed until later in 2013. Senior adviser to Blackrock Bob Doll said: "Markets seem to be predicting that Congress and the Obama administration will be able to engineer some sort of short-term stop-gap measures that delay or dull the immediate impact of the fiscal cliff, leaving many of the hard decisions on hold. If no agreement is reached, it is likely that the country would be plunged back into recession and that Mr Obama would be drawn into a long and protracted period of warfare with the Republicans over fiscal issues.
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Mr Doll said: "Even if agreement is reached on the fiscal cliff, we maintain the view that the country will remain saddled with an uncomfortably high unemployment rate and that it will struggle to grow by much more than two per cent." Both Peter Lowman, chief investment officer at Investment Quorum and Justin Urquhart Stewart, a founder of Seven Investment Management, said they expected America would delay an agreement on the fiscal cliff by at least six months.
As an alternative option, Mr Urquhart Stewart suggested Mr Obama could implement a "glide path" over a number of decades to encourage growth and build confidence.
He said: "The US could draw up a longer term glide path for the debt and deficit and in effect park the problem by drawing up a plan for several decades - which of course would never see its final end as it would be interfered with by politicians before it was finished.
"However, it would allow Mr Obama and the others to focus on immediate growth plans and 'fool' the market into not focusing on it for the moment. This would allow confidence to build up on shorter term issues such as housing and consumer spending."

CHINA
America is not the only country facing political changes and financial problems. On the other side of the world China is also hoping the outcome of its latest elections will spur its weakened growth.
The election of Xi Jinping in November will begin a new era in which he will reign for the next ten years. Historically, a change in leadership has been followed by a pick-up in investment spending and the challenges for the country will be to tackle structural imbalances and manage the transition to a consumer-focused economy. However, on the downside, Mr Xi will inherit the weakest economic growth for 30 years with GDP of 7.4 per cent, down from 10 per cent in 2009.
Martha Wang, portfolio manager of the Fidelity China Focus fund, said: "I believe the conclusion to this contest will remove the political shackles that have been holding the markets back. I think the new leadership will be willing to accept lower GDP growth as it will focus on quality rather than quantity of GDP growth. This means a continued focus on the domestic consumer and further enforces structural growth opportunities in consumer-related stocks."
Investment Quorum's Mr Lowman said: "There are two sides of the coin, some will say China is slowing while others will dispute that and say the recovery is coming through with the new Government. We do have investments in China but through an emerging markets fund rather than a direct China fund. I think other emerging markets in South-East Asia are performing well."
He is not the only person who believes the South-East Asian economies will be a popular choice for investors and for Financial Planners' clients looking to the long-term there could be growth in these emerging markets. Caspar Rock, investment manager at Architas said: "I've noticed a trend that countries nearer to the Equator are doing better than those further away. In Asia, the Philippines and Thailand are stronger than China and Japan. In Latin America, Northern countries like Mexico, Venezuela and Columbia have performed better than Brazil and Argentina."
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UK
Back on home turf, Britain has continued to see poor growth, continued high inflation and low interest rates. The Bank of England has hinted that CPI inflation, which stands at 2.7 per cent, will remain above its two per cent target in the near term rather than gently falling towards target.
The latest GDP figures issued at the end of October showed that the UK experienced growth of one per cent in the third quarter of 2012 and was subsequently out of a recession although in his Autumn Statement on 5 December the Chancellor George Osborne reported that GDP for the whole of 2012 would be down by 0.1 per cent in 2012 although a pick up to 1.2 per cent was forecast for 2013 and 2 per cent in 2014.
Talking about the third quarter improvement, Tom Elliott, global strategist at JP Morgan Asset Management, said: "There are many qualifications that one must apply to the data. The qualifications include the flattering comparison against a second quarter that included the Queen's Diamond Jubilee, which depressed spending during the period, and the inclusion of large one-off contributions from TV Olympic broadcasting rights and Olympic ticket sales. The combined effect of which suggests we ended the recession not with a bang but, if adjusted, with a whimper." Mr Elliott was not the only person who was feeling doubtful about the future of the UK economy. Mr Rock said: "The UK economy will be dull. I've said that for the past two or three years that economic growth in the UK will continue to be dull. We do have the Funding for Lending scheme and quantitative easing but these are just headwinds, don't expect a strong recovery."
Mr Cox said: "The Bank of England is forecasting an average of 0.3 per cent growth in GDP per quarter in 2013 and inflation remaining over two per cent. You have to think about what factors may improve the economy significantly above this and the answer is there is nothing." Despite 'Super- Mario' Mario Draghi, president of the European Central Bank's comments in July about doing "whatever it takes to preserve the Euro", Financial Planners are still concerned countries such as Greece and Portugal could still see problems.
Mr Cox continued: "If anything the situation is more likely to be worse than this than better, particularly if we see a deepening crisis in the Eurozone, Iran and so on and there is more downside from here than upside." Others were more optimistic and disputed the idea that Britain would have a troublesome 2013. A report by Ernst & Young in its ITEM Club Autumn 2012 forecast suggested that growth could pick up to 1.2 per cent next year and consumer spending would pick up by 0.8 per cent. Seven IM's Mr Urquhart-Stewart said: "There's a long way to go, people aren't investing as they have no confidence. We need a leadership who know how the economy works. However, there are some more positive attitudes and I hope 2013 will be better than this year with market pick-up." Mr Lowman said: "I don't think there will be a triple-dip recession, growth is very anaemic and could push us down but I think we're being very negative. There are some green shoots around."
In his Autumn Statement, Mr Osborne said: "Britain is healing." He forecast a slow recovery in 2013 and 2014 and further progress on deficit reduction albeit at a slower pace than expected.

ASSET CLASSES
In terms of asset class it looks as if investors and wealth managers are moving away from gilts, which have been overpriced lately, and bonds. In contrast, equities, particularly global equities, and fixed income are looking favourable. Carl Astori, senior economic adviser to Ernst & Young said: "Provided you can get the US fiscal cliff out of the way it will be a positive year for equities. Investors will continue to hunt for high yields." Mr Lowman said: "We're going to increase our exposure in Europe with luxury goods and car manufacturers which are exporting to Asia and maintain exposure in America to global brands and multinationals such as Palmolive and Coca- Cola. High yield bonds and high yield equities will be good and will be powerful in low-growth environments. Currencies are difficult to call, the dollar has weakened and there's real issues with the Japanese Yen which could give investors a nasty shock. Commodities could do well but it's dependent on China."
Darren Lloyd Thomas CFP^CM, managing director of Thomas and Thomas, was also in favour of high yield bonds but admitted that forecasting always added unknowns. He said: "We tend to work on the very conservative side for figures and use historic figures as far back as we can realistically back test. I see high yielding bonds, gold and emerging market debt (local currency) being the big growth areas in 2013 without a doubt. Then again, there are two types of forecasters, those who don't know and those who don't know they don't know!"

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