What's in store for FTSE 100 in 2017?

It's been one of the most remarkable years, both in finance and politics, that I can remember. A perfect set of circumstances - low interest rates, a weak pound, decent economic growth among them - meant equities were the only show in town for much of 2016. And there's still enough optimism to keep indices near record highs.

Markets close at 12.30pm the Friday before Christmas, so it's a half-day holiday for most in the Square Mile. With little going on and one eye on a post-work pint, or two, trading volumes are predictably light.

However, despite a tight range, and with the Italian banking system bailed out by the state, the FTSE 100 still made a new ten-week best at 7,071, just 58 points off a record high.

Seems investors are still backing a recovery at beat-up outsourcer Capita. It's the top performer Friday, and now trades up 20% from its 9 December low.

Only thing stopping the blue-chip index from doing even better are losses at index heavyweights HSBC, Royal Dutch Shell and GlaxoSmithKline.

Barclays is bottom of the pile after the United States Department of Justice filed a complaint against the UK lender linked to its involvement in the sub-prime mortgage scandal between 2005 and 2007.

"The complaint is a civil claim that makes a number of allegations, including mail and wire fraud," said Barclays, which rejects the allegations. "Amongst other relief, the complaint seeks unspecified monetary penalties."

We knew Barclays was implicated in so-called US residential mortgage-backed securities, so it's not a shock. It is, however, a reason not to own Barclays today. Both Deutsche Bank and Royal Bank of Scotland are in the dock on similar charges. Deutsche has just been fined $7.2 billion. RBS will find out what the damage in 2017.

Treacherous 2017

And 2017 is likely to be even more treacherous than this year for many reasons. Donald Trump is handed the keys to the White House on 20 January when we'll discover whether a promise to spend big and cut taxes is the real deal, or just hot air. Can Trump really make America great again? He wouldn't be my go-to man.

He's no fan of Federal Reserve chairwoman Janet Yellen either. It's likely she'll have overseen a number of interest rate rises before her term ends in February 2018 - three is where the hot money's at. But the US economy is growing fast, even without Trump's spending, so there could be a surprise here.

Two months after the inauguration, Theresa May will invoke Article 50, triggering Britain's two-year withdrawal from the European Union. Economic growth here is already expected to fall sharply in 2017, and rising inflation is inevitable as the weak pound makes overseas goods more expensive to import.

A consumer squeeze will certainly make life tough for retailers, especially. Worse it gets, the more likely housebuilders will suffer, too. Both sectors have made partial recoveries since the post-referendum rout and been fairly resilient in the past six months, but the scale of the selling in June shows how susceptible they are to swings in sentiment. Firms like Taylor Wimpey and Barratt Developments already offer massive dividends as reward for perceived risk.

So there is the very real risk of a mild recession here next year.

In Europe, we'll know in May whether Marine Le Pen, leader of the far-right Front National party, is the new French president. A win for her would put the future of the European Union in serious doubt. I can't see it, but you never know…Brexit…Trump. There's a sleeping giant in heavily-indebted Greece, too, where further problems are inevitable.

However, despite this grim list of banana skins on steroids, I know from conversations with City professionals, and statistics bear this up, that investors have wads of cash under the mattress ready to deploy during the next market correction - officially a drop of 10% or more.

It is inconceivable that we will escape a serious sell-off, whether it's early January - remember, this current rally is seven weeks old, and probably has one last push higher - or after Trump takes office.

Whenever it comes, my money's on another nerve-jangling year of volatility and surprise. It will be more of a shock to me, however, if the FTSE 100 does not make a new high in 2017. Much like 2016, I suspect buying the dips will remain a sensible and profitable long-term strategy.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.