The festive season approaches and investment managers seem more concerned with finalising their Christmas shopping than with propelling the market in any particular direction. Nobody can accuse the year just ending as being easy but at least we look likely to produce a positive outcome for investors overall, unlike 2011
It could prove interesting to take a quick glance back at a year which certainly proved to have two halves.
The old saying that “as goes January, so goes the year” looked like coming unstuck in 2012. Shares got off to a brisk start, but the seemingly intractable sovereign debt problems in Europe and a sluggish world economy soon took the shine off investors’ perceptions.
A notable exception was the US where, with a pending presidential election, economic activity took a turn for the better.
Cynics, of course, would say that political imperatives ensure that the economy enjoys a robust period ahead of an election but there were reasons to believe that things really were getting better.
For a start, the embattled residential property market, blamed as the trigger for America’s financial woes, started a hesitant recovery. Consumer confidence rebounded as a consequence. But other positive news developed throughout the year.
While the emergence of shale gas as a prime provider of US energy needs has stimulated exploration elsewhere, including within this green and pleasant land, it did serve as a reminder that America is rich in natural resources. Indeed, estimates now suggest that they could overtake Saudi Arabia as the world’s largest oil producer within a decade. Add to that the news that manufacturing jobs are returning stateside and an encouraging picture emerged.
Back home it took the successful London Olympics to lift shares out of their torpor. It appeared sufficient to deliver a stronger third quarter economic performance than had been feared, but even so, the back drop of a sluggish recovery at best and more years in the austerity room than had been forecast did little to bolster the fortunes of the coalition.
Fortunately our own stock market has an altogether more international feel to it, but marking time was the best we could manage overall.
As for Europe, it took until the end of the year for a more positive outcome to emerge, with a last minute deal between the richer northern nations apparently consigning “Grexit” – as the Greek ejection from the Euro has become known – to a much later date, perhaps never.
With the German/French accord disentangled following Sarkozy’s departure from the French Presidency, it seems Frau Merkel’s relationship with the head of the European Central Bank has assumed greater importance. After Merkozy, Dragkel perhaps?
The greater confidence that a Eurozone deal engendered was enough to propel leading continental bourses to the top of the performance stakes for the year.
Not that all was sweetness and light. The news that Mario Monti was to step down early as Italy’s premier, allowing Silvio Berlusconi another shot at leadership, did little for the health of Italian shares. Europe is far from a finished chapter right now.
As for Japan, China and other emerging countries, there has been just as much conflicting news as anywhere. China has a new leader while America has invited the old one to stay on. One election was so inscrutable to us westerners that understanding how it took place is truly beyond us.
The other cost eye-watering sums in election expenses. Both were foreign to us Brits. But both delivered a degree of consistency that will be welcomed by investors. Perhaps that is what we need to concentrate on for the year ahead.
A Merry Christmas and a Happy and Prosperous New Year to investors and their advisers alike.
Brian Tora is an associate with investment managers JM Finn & Co