February 2015 Update
Strong performance across Global Markets
An array of factors, including encouraging corporate results, merger and acquisition activity and positive economic news propelled the FTSE 100 to a new peak in February. The last time the index closed at this level was 15 years ago, at the height of the dotcom boom.
Wall Street also made good progress over February, with strong investor sentiment lifting the S&P 500 index to a series of record highs. The technology-focused Nasdaq index turned in a particularly strong performance, reaching a level last seen in 2000. Investors’ confidence was boosted by US fourth-quarter corporate profits, which exceeded analysts’ expectations. Market sentiment was boosted by a strong submission from Cisco Systems, while Apple shares reached yet another record high, this time increasing the iPhone-maker’s market capitalisation to more than $750 billion.
As a group, equity markets in the Eurozone region did well in February, with investors – for the most part – shrugging off Greece’s protracted negotiations with its international creditors. At the end of the month, and following a lengthy series of consultations with the so-called troika of creditors (the European Union, the European Central Bank and the International Monetary Fund), Greece finally arrived at an agreement to extend its bail-out scheme. In order to secure this leeway, the Greek government had to provide proposals for structural reform, including a promise to overhaul the country’s tax inspection regime.
US government bond prices fell in February, pushing the 10-year yield sharply higher. The move was in part prompted by an acknowledgement that the first interest rate hike is drawing ever closer. In the UK, Gilts followed the US path of lower prices and higher yields. The market movement was fuelled by higher-than-expected economic growth and expectations of rising inflation.
European bonds outperformed. In Germany, the 10-year German Bund yield continues to hover around the 0.3% mark. Bond prices have been bolstered by the imminence of the European Central Bank’s bond-buying programme (quantitative easing). This will be sizeable. Meanwhile, government bonds in Europe’s peripheral nations performed well, as low yields in the ‘core’ markets encouraged investors to continue the hunt for yield.
The New Year got off to a weaker start for UK commercial property, according to industry figures for January (the latest data available). A 0.8% total return in January contrasted sharply with a 1.6% return during December. Capital growth slowed to just 0.4% (1.1% in December), suggesting that the pricing environment is encouraging investors to pause a little. Prices have been driven by strong investor demand in recent years, meaning it has become difficult to find good value in the market.
Should I make any changes to my investments?
Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.
One way in which you can help reduce the impact of any market volatility is to spread your investments across different asset classes and regions. For more information about investing across different asset classes, take a look at our An introduction to diversification in multi-asset funds guide.
Remember that before making any changes to your investments, you should seek financial advice. If you don’t have a financial adviser, you can find one local to you by visiting find a financial adviser, which is responsible for promoting financial advice in the UK.
All figures quoted are in sterling terms to 31 December 2014 unless otherwise stated.
The information contained in this article has been derived from sources which we consider to be reasonable and appropriate. It may also include our views and expectations, which cannot be taken as fact.
Investment markets and conditions can change rapidly and, as such, the views expressed in this Update should not be taken as statements of fact nor be relied on when making investment decisions. Forecasts are opinions only, can not be guaranteed and should not be relied on when making investment decisions.