A Strange Year
I thought that the weather in Scotland couldn’t get any stranger but writing this on a December day that is warmer than many we saw this summer is a new experience even for me. The timing of this is even more strange as it is just over a week since we experienced storm Desmond which brought widespread flooding to the north of England and southern Scotland.
The naming of storms in the UK is a new phenomenon, and it is a pity that we could not bring in something similar when dealing with stock market turbulence. It would be much more fun if the falls we saw at the start of this month had a name. Imagine the headlines “Billions wiped off shares as Doris batters investors”.
Now before you start thinking this Informing You is even more random than usual, there is a point to this. When the weather is bad you would probably delay doing work in the garden unless it was essential. You may decide not to go out at all. However, you do this knowing that the weather will improve at some point (yes - even in Scotland!) even if you do not know when. Investing is no different.
Smart investors already think like this. It is one of the reasons why they have a cash “buffer” to ensure they do not have to venture into the markets for money when things are stormy. They also do not get overly concerned when storms like “Doris” come along. Instead they take a watching brief and relax.
We all know that weather storms don’t last forever and that once they pass the weather tends to revert to the norm. Financial storms are no different, and history will view storm “Doris” as no more than a squall.
Even though I could venture out in my shirt sleeves it is also the time of year when I take a look back at the last twelve months. In January nobody would have predicted that oil would be sitting at $37 a barrel. Now of course the same people that thought oil was going to $200 a barrel, yes, I mean you Goldman Sachs, are predicting that it could go as low as $20. Well, with their forecasting record who could doubt them?!
Equally very few people would have predicted that it would be December before the Fed increased interest rates. Twelve months ago the consensus opinion was that this would have happened by the summer and that we may well have seen a second rise by now. So all in all a typical year where most predictions turn out to be wrong.
As for markets, in January the FTSE100 index started the year at 6550, rose to a new record of 7090 in mid-April and has fallen by 14% since then. Thankfully dear client you are invested with quality fund managers and not in “passive” funds which simply track the index, but for those poor people that do 2015 will not be a very merry Christmas.
I will no doubt look ahead to 2016 next month, but one thing I am already certain is that market conditions such as these with commodity prices and interest rates acting in ways that even the “great” Goldman Sachs cannot predict, are perfect conditions for quality stock picking managers and that we will continue to ensure that you remain invested with the best available.
On this subject it was announced this week that the manager of one of our favoured funds, Newton Global Income, James Harries is leaving for pastures new. He is being replaced by the fund’s current co-manager, Nick Clay, and we have arranged for him to come and see us at the end of January. From our existing experience of Nick we think he will be a decent replacement and we have no cause for concern at this time.
That leaves me to thank you for your kind comments throughout the year and to wish you all a very enjoyable Christmas and New Year.