December delivered a relatively eventful finale for 2014.
On the one hand, investor sentiment was boosted by encouraging news on the US economy and signs that leading central banks – notably in the US and the Eurozone – remain supportive. However, confidence was considerably undermined by concerns about the impact of the falling oil price and questions over the economic outlook for China, the Eurozone and Russia.
In the UK, the FTSE 100 index fell slightly over December and was down over 2014 as a whole, ending the year at 6,566 points. Share prices in the energy sector remained volatile, destabilised by the falling oil price. The UK’s economic expansion during the third quarter of 2014 proved slower than initially calculated – the economy grew at an annualised rate of 2.6% during the period, compared with an earlier estimate of 3%.
On the continent, fragile investor sentiment was dented by the news that Greece’s prime minister had called a snap election for January. The Athens General index plummeted and was down 28.9% over 2014 as a whole. Volatility has continued and markets have fallen further in the past week. Nevertheless, investors can draw some reassurance from the European Central Bank, which confirmed that preparations for additional stimulus measures had been “stepped up” in order to boost growth in the region’s moribund economy.
Germany’s Dax index fell during December but was up 2.7% over the year. Across the Atlantic, the Dow Jones Industrial Average index reached further new highs during December, closing above 18,000 points for the first time. Investor sentiment was buoyed by the news the US economy had expanded at an annualised rate of 5% during the third quarter, and by reassurance from the Federal Reserve over the future path of monetary policy. Japan’s markets continued to suffer from the uncertainties yet the Nikkei 225 index was up 7.1% over 2014 as a whole.
What does this mean for investors?
Financial markets and economies had a bumpy ride in 2014 yet on the whole returns were positive. 2015 looks as though it could follow the same trend.
As always investors will benefit most where they hold a diverse range of investments and asset classes ranging from corporate bonds and property through to UK and global equities.
For our clients we will continue to review their holdings and help position our clients plans to hopefully reduce volatility without jeopardising investment returns.
Please get in touch if you would like to discuss your investment strategy.