It is the time of year when investors and market strategists talk about what we can expect in the year ahead, so I thought I'd better gaze into the crystal ball.
But first a glance in the rear-view mirror. It is likely that 2015 will have been a less profitable year for charitable investors than the preceding 10, when the average long-term charity investment portfolio returned almost 8 per cent a year (according to the financial services company State Street).
Despite this relatively lacklustre 2015, most long-term charity investors will have seen growth in the value of their investments over the past decade, even after adjusting for inflation and taking into consideration spending of 3 to 4 per cent a year. These investors have benefited from a recovery in equity, bond and property prices after the 2008 crisis, but things are looking a little more uncertain for the future.
The economic recovery is not synchronised across the globe, with the US and UK further ahead in the cycle and Europe and Japan at an earlier stage. This has implications for monetary policy, and interest rates in particular - we are expecting gradual increases in both the US and the UK over 2016. Central banks in Europe and Japan are still trying to stimulate their economies, causing a divergence. Add a slowing China and we've got a recipe for uncertainty.
Equity markets tend not to like uncertainty: investors prefer to take money out rather than risk an unclear future. So my prediction for 2016 is that we will see more oscillations in value in equity markets. We had a taste of that in August, when investors got worried about Chinese growth and news about stock markets migrated temporarily from the inside to the front pages of our papers. However, enhanced volatility, although uncomfortable, isn't always bad news; it should be expected from equity markets and can provide investors holding cash with attractive opportunities to invest.
But where to invest? The challenge is that in the absence of a more vigorous global economic recovery, it is difficult to move out of the expensive, quality company shares into the cheaper areas of the market, which tend to be more cyclical. This is why markets remain stuck in a loop, endlessly chasing income and pushing already expensive assets to even loftier levels. Market performance has been skewed by a few in-favour companies. In the US, the Fang companies as they have become known (Facebook, Amazon, Netflix and Google) have generated astonishing performance in 2015 (to the end of November) with each share up between 40 per cent and 170 per cent, when most of the other companies in the main US stock market index (the S&P 500) have gone down.
Against this backdrop, we are slightly shifting gears for our charity clients. Where previously we emphasised making hay while the sun shines, we now focus on avoiding potholes, emphasising markets and sectors where corporate earnings and valuations are supportive. Where we are tempted into more cyclical areas, we need to see deep discounts. Although these opportunities might well present themselves in 2016, charity investors should be prepared for a rather more uncertain period in the investment markets.
Kate Rogers is head of policy at Cazenove Charities