City Watch: Brian Tora reflects on a year of changing fortunes
- Credit: Archant
With the end of the year fast approaching and efforts increasingly being diverted into matters festive, it seems an opportune moment to reflect on the past 12 months and consider what the New Year might have in store for investors.
There is, after all, little in the way of hard news around at present, though a declining oil price and an imminent election in Japan does give investors something to ponder over.
Last week was quietly positive for markets, even if this one has got off to a trickier start. Indeed, it has been a year when trends have been difficult to determine and changes of direction have occurred to confuse investors. A deteriorating global economic picture and continuing concerns in the world’s trouble spots may have smothered earlier confidence, but have been insufficient to damage sentiment terminally.
Perhaps it is the clear co-operation between national leaders to regenerate economic progress that is keeping a degree of enthusiasm for risk assets bubbling away in the background. That, or the amount of cash that has been pumped into the system by central banks. With quantitative easing still present in many regions – and not yet fully consigned to history in America – it is still too early to determine what its withdrawal may mean for markets.
Certainly, there is evidence in the past that printing money on such a scale leads either to inflation or helps to inflate asset bubbles. These bubbles burst when access to easy money is withdrawn, as was the case in the technology boom that collapsed in the early months of the new millennium. But it is deflation, rather than inflation, that causes concern today, while asset valuations have yet to achieve bubble status, except maybe in London property.
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So looking ahead to the New Year leads me to believe we may be in for more of the same. Even the prospect of an interest rate rise appears to be receding. It might be better to wait for the festive season to pass before making too many predictions.
: : Brian Tora is an associate with investment managers, JM Finn & Co.
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