As we start to settle into the New Year, and wish each other well for 2012, it is easy – when minds wander – to wonder what might happen over the next 12 months. The last year was full of uncertainty, and it seems there is no reason to think that this year will be any different. As far as financial matters are concerned, we are no more settled than we were last January, and within reason, anything could happen. Who would have imagined the changes that have occurred in the Middle East, for instance?

As financial markets are very keen on stability, and certainty, I would imagine that the current scenario would indicate that we are in for another somewhat volatile year in most areas. As I write, the FTSE100 is around 5700, the highest that it has been for a little while, due to a late rally in 2011 and a reasonably bright start to 2012. However, it would be no surprise to see several percent knocked off the value of the market, in the twinkling of an eye!

At a recent meeting with a Fund Manager, he confessed to me that he had absolutely no idea of where the markets would end up this year, despite his being sure that there was considerable value to be found in the many stocks that he has on his buy list. The problem is what Mr Rumsfeld might refer to as “unknown unknowns”. With the best will in the world, and the finest research, there is no way that we can foretell the sentiment of the markets. Mostly driven by economic and political events, it is also a slave to the kind of event that no-one expects, the like of which include the 1987 storm, the Kobe earthquake in 1995 and September 11 2001. Even without any dramatic events, such as these, the world economic situation is in a sufficient state of uncertainty, (over the Eurozone to start with) to ensure that volatility is going to be the name of the game, for some while to come.

Acutely aware of the fact that it may look like I am hiding behind a cloak of volatility in order to avoid making any predictions, I will, with no huge feeling of certainty, give a few glimpses of the coming year, as I see it. I think the price of gold will go up. It is, customarily, a safe haven in times of uncertainty, and will probably remain so: I think the anomaly that has seen a rising gold price, yet a fall in gold mining share prices, will end. In addition, I think that the US market will do reasonably well, as their Presidential election looms up, and I think that in the UK, the Footsie will probably end the year higher.

There, that should be enough to spark a world crash, but if it does, that will be a buying opportunity! Remember, buying little and often can help reduce risk, and don’t keep all your eggs in one basket, unless you like omelettes.

David Foot