2nd December 2015
Heather Ferguson, investment analyst at Hargreaves Lansdown looks back over a year in the investment market, the winners and the losers…
The sound of breaking china reverberated around the world in the latter half of this year. Commodity-related industries have taken a pasting on concerns over China’s slowing economy, and shares in many emerging market regions have suffered as a result.
Closer to home, uncertainty over when interest rates will rise, a general election, and numerous budget changes have combined with China woes to cause a volatile year for UK shares. Despite this, the UK stock market has still generated a positive return for investors so far this year, albeit a modest one.
2015 on the FTSE
It has been a rocky year for the stock market but actually the FTSE All Share Index has returned 2.3% so far this year with dividends reinvested (to 30th November).
The winners: Taylor Wimpey, Barratt Developments, Persimmon and Berkeley Group were among the best performing companies in the Footise, as record low interest rates and favourable government policy provided the home construction sector with a 36% boost.
The losers: the bottom of the Footsie in 2015 is a roll call of mining companies (Rio Tinto, Antofagasta, BHP Billiton, Anglo American and Glencore); the sector fell 37% over the year as concerns over slowing growth in China cast doubt over the future profitability of these companies. Glencore performed the worst, falling 66% over the year.
Highlights of the year:
January – the ECB launches QE
The announcement of a 1 trillion euro QE programme gave European stocks a boost and pushed bond yields down. European funds benefited from this tailwind and were only topped in the regional performance tables by funds investing in Japan, where there has also been a massive QE program. Funds investing in Europe were the best-sellers in October, selling 53% more than at the same point last year. Meanwhile the euro has weakened significantly against the pound over the year and £1,000 now buys 160 euros more than at this point last year.
March – 6th anniversary of interest rates at 0.5%
£1,000 deposited in March 2009 (when interest rates fell to 0.5%) would now be worth £1,044, or £891 in real terms once CPI is taken into account. The immediate future doesn’t look too bright for cash savers either. Rates aren’t expected to rise until mid-2016 and may even stay static until 2017.
March – FTSE breaks the 7,000 mark
Shortly after breaking through its 1999 high of 6,930.
April – Investors withdraw £1 billion from UK funds
Investors got the election jitters as a hung parliament looked a certainty, and the Hargreaves Lansdown Investor Confidence Index fell by 11% in one month, the largest monthly fall since May 2012.
April – Pension Freedoms introduced
Investment-backed options have proved ten times more popular than annuities since April, and UK equity income has been the sector of choice for money invested in drawdown through Hargreaves Lansdown.
June – Alternative Investment Market turns 20 years old
The AIM market is a mix bag of outstanding success stories and resounding flops. The AIM Index has fallen 21% since launch, yet a number of companies included in the index have performed exceptionally well – ASOS for example which has returned 13,858% since it launched on the market in January 2001.
June – Greek debt negotiations reach a critical phase
Distress across the Channel caused stock prices in the region to fall, which was echoed in the UK – the FTSE 100 lost 5% over the month.
July – Greeks reject the terms of European bail out
Investors had already priced Greek woes into markets, so although stocks fell on the news, it was more of a gentle slide than a free fall.
July – Summer budget.
The first blow to buy-to-let investors was delivered in the summer budget when it was announced interest relief would be reduced to the basic rate of income tax only. Then in the Autumn Statement potential landlords were told they would pay an additional 3% stamp duty charge from April 2016.
Inheritance tax gets ever more complicated as an additional £175,000 tax-free family home allowance is to be phased in from 2017, creating the potential for a combined married couple’s allowance of £1 million.
August – Summer storms hit the Footsie
The FTSE 100 closed at its lowest level since January only to experience one of its best ever days a few days later. Slowing economic growth, currency devaluation, and stock market mayhem in China hit commodity and mining stocks, dragging the UK stock market down with it. The Footsie embarked on its longest losing streak in over 10 years to fall over 10% in 10 days – only to experience one of its best ever trading sessions a few days later, recouping £60 billion and climbing 3.7% in a single day.
October – The government announces the sale of £2 billion Lloyds Bank shares to the public
The Lloyds offering has already proved very popular with the investing public. It is likely to attract first-time investors, alongside silver savers hoping Lloyds will return to its pre-financial crisis position of ‘dividend giant’.
Best and worst performing sectors this year
Despite ailing economies, smaller companies in Japan and Europe stormed ahead.
|YEAR TO DATE RETURN %|
|IA TECHNOLOGY & TELECOMS||8.11|
|IA UK SMALLER COMPANIES||12.6|
|IA EUROPEAN SMALLER COMPANIES||13.2|
|IA JAPANESE SMALLER COMPANIES||14.98|
Unsurprisingly, emerging markets have been in the doldrums this year and have encountered the biggest losses.
|YEAR TO DATE RETURN %|
|IA GLOBAL EMERGING MARKETS||-7.8|
|IA ASIA PACIFIC (EXCLUDING JAPAN)||-4.18|
|IA GLOBAL EMERGING MARKETS BOND||-2.66|
|IA GLOBAL BOND||-1.54|