4th quarter review of 2014

Following on from the first day of trading for 2014 when the FTSE 100 stood at 6730, the FTSE 100 hit its highest at 6878 on the 15th May 2014, fell to its lowest at 6182 on the 16th December 2014 and closed the year at 6566.     

So as we look back over the last quarter of 2014, what has happened?

The Rouble collapsed to a record low in December, despite the Central Bank of Russia having raised interest rates from 10.5% to 17% in an effort to prop up the currency. Russia has been hit particularly badly by the fall in oil prices.

The US economy and its markets are booming. The lower oil price remains a big positive for US consumers with rises in consumer spending and rises in employment. Federal Reserve Chair, Janet Yellen made fresh comments in a news conference, which were widely interpreted as signaling that there will be no US rate rise before the April Fed meeting, at the earliest. Yellen also indicated that when rates do eventually begin to rise, it may be slower than many have been forecasting.

In Japan, real wages remain in deeply negative territory and consumer spending is week. Prime Minister Shinzo Abe secured a comfortable victory in the snap election he had called, winning 2/3rds of the seats in government. This result was interpreted as a vote of confidence in the stimulus programme and giving Abe a mandate to go further with reforming the country.

The European Central Bank has reduced rates and may move to quantitative easing in the coming months. This has depressed the Euro, making European imports cheaper.

In the UK, Tesco is being investigated for mis-stating hundreds of millions of pounds in revenue. UK household expenditure is in good shape, driven by falling unemployment, falling food prices and fuel prices. As you can see we have experienced a bumpy ride over the last 3 months and this may continue into 2015 with the fears over falls in the oil price and the upcoming General Election.

Also with the longest-running low interest rates, if you have funds held in deposit accounts then your interest rate could be below the rate of inflation. This is where our active management approach comes into its own.

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