How central banks shaped investment markets in 2015

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The protagonists of 2015 have been major central banks, with monetary policy driving markets and investment decisions over the past 12 months.

The US finally ended its zero-interest rate policy yesterday, while central banks in Europe, the UK, China and Japan have kept interest rates at zero or below, and in most cases have taken extraordinary measures to support the economy.

The year started and ended with European Central Bank president Mario Draghi and the initiation of his €60bn monthly quantitative easing program in March.

The programme was due to end in the second half of 2016 but this has now been extended until March 2017 as the ECB looks to boost inflation in the eurozone.

AJ Bell investment director Russ Mould says Draghi is “doing his best to find and buy some time so countries can carry out their reforms”. But he adds 2015 has taught the markets “you shouldn’t put your faith in central banks to bail you out as they have their own agenda”.

Central banks and government authorities’ interventions in the market escalated in 2015, starting with the Greek debt saga and its bailout extension in the first half of the year, shortly followed by the Chinese crash and its subsequent market intervention.

As investors fuelled Chinese stocks in a weak growth and earnings environment, in July the Shanghai stock market fell by 30 per cent, exporting volatility around the world.

Tilney Bestinvest managing director Jason Holland says: “This year we’ve seen the debt crisis shifting from the west to the east because China has seen a vast issuance of debt during the years of low interest rates.

“Part of that pressure led to a horrible period for emerging markets, because a lot of them took advantage of ultra-accommodative policy in the US to borrow very cheaply and now the costs of capital are rising in expectation of a rate hike.”

While central bank moves have taken the lion’s share of the headlines, elsewhere industry issues have dominated the asset management sector in 2015, including a major regulatory review announced by the FCA and ongoing turmoil in the trade body space.

The regulator announced it will assess asset managers on how they compete to deliver value, whether they are motivated or able to control costs, and how investment consultants affect competition for institutional asset management.

Meanwhile, the Investment Association has seen a period of turmoil starting with the departure of its chief executive Daniel Godfrey, whose approach led to high-profile members M&G and Schroders threatening to quit the trade body.

The IA has since announced an indefinite delay to the implementation of its Statement of Principles, an initiative spearheaded by Godfrey to boost transparency in the sector.

Threesixty managing director Phil Young says: “What the IA saga has done is expose fund managers’ resistance to change. The amount of hostility they had for Godfrey and the work he was doing shouldn’t be underestimated.”