2015 was a volitile year for investors, with the introduction of quantative easing in Europe, extreme volatility in China over the summer months and the first interest rate rise in the US for 9 years. Here are some of the highlights of a year in the markets:
In the UK, the FTSE finished the year down 4.93% at 6242, having peaked at 7122 during April, as the major constituents of the index suffered on the back of falling resource prices and a strong US Dollar – some parts of the mining sector fell by over 50%. In contrast, the FTSE 250 index and FTSE Small Cap Index both returned in excess of 9% over the year showing the strength of the domestic market.
Across Europe, markets ended the year with mixed fortunes. It was a positive period for Italy (12.6%), France (11.6%) and Germany (9.5%) following the introduction of QE by the ECB, while on the downside markets fell in Spain (-7.1%) and Greece (-32.5%). The Euro was also hit hard over the year, falling 6% against sterling.
While growth in the US was positive, stocks were little change for 2015, with the S&P 500 closing at 2043, down only 0.73%.
Across Aisa, markets were mostly higher. Japan’s Nikkei gained 9% over the year in local currency terms, with higher returns for sterling investors. In China, the Shanghai Composite also ended the year up 9% despite all the market volatility over the summers. At its highest point in 2015 the index was up 60%, before falling into negative territory within 3 months to the low point in August. Since then the market has steadily recovered and ended up 20% from that point.
In contrast, Emerging Markets suffered on the back of declines in commodities and the strong US Dollar, with the MSCI index falling 8% over the year.
It was another bad year for commodities. Oil prices continued to fall sharply, with Brent Crude Oil falling 30% to finish year end at $36.74 a barrel. After a positive start to the year, with prices reaching $67.50 in May, prices declined through the rest of the year. After peaking in January, gold prices sold off steadily throughout the year, closing at $1061 an ounce, down almost 12% over the year. Iron ore, nickel and copper suffered much more.
It was another good year for commercial property with the IPD UK All Property index returning 7%.
In fixed income, Government Bonds lost ground in 2015, with the 10 year bond yields in the US, UK and Germany all finishing higher by the end of the year. In the UK, the 10 year yield finished at 1.96%.
The volatility in global markets looks set to continue into 2016, with the Shanghai Composite index closing the first session of the year down 7% this morning, leading to a negative opening across Europe. The uncertainty of China, interest rates and global macro events will continue to be at the forefront of investors’ minds for the year. There is value out there, but stock selection for growth, will be key.
The above summary is a review of the investment year written by one of our Fund Managers, Wellian Investment Solutions Ltd.