Last year proved to be a roller coaster of surprises for many investors, even though the US Federal Reserve did (eventually) manage policy ‘lift-off’ as was widely anticipated 12 months ago. However, the ongoing rout in commodities, led by a 30%+ decline in energy prices, continued to drag on markets, particularly those with greater commodity exposure. As a result, headline index movements across the globe disguised divergent trends below the surface, as a narrowing range of countries, sectors and stocks continued to defy the softening market tone.
Somewhat remarkably, despite the persistence of poor media headlines, the Chinese A-Share index managed a 9.3% gain in local currency terms (versus 4.6% in US dollar terms) as government intervention, and a ban on sales of large holdings, calmed investors nerves after the ‘botched’ currency devaluation in August. A key issue for 2016 is likely to be whether the Fed manages to engineer the gradual ascent of interest rates anticipated or, like Buzz Lightyear in Toy Story, instead of flying on the path to ‘normalisation’, the Fed gets found out to be ‘falling with style’.
Peter Hensman – Newton, a BNY Mellon company