Predicting more of the same proved prescient

Otherwise we simply hear ad nauseam that growth is expected to be ‘sustained’ at ‘reasonable’ levels in the coming year and there will be many ‘opportunities’ and so on…

Oriel’s Patrick Barton, featured in this week’s interview, last week responded to calls for a FTSE punt with the following: “Enjoy the sport of forecasting, either as a participant or a spectator, but invest only on the strength of values, thoughtfully and conservatively appraised. Anything else is speculation.”

That is indeed true, but it is still good to know that a fund manager has some ability to predict the direction of things, which is why I always enjoy a flick through the archives at this time of year.

It’s probably fair to say that 2014 has been a year of more of the same for global investment markets. The US maintained its strong performance, emerging markets continued to languish and Europe was rocky as recessionary pockets cropped up again.

In Europe and Japan, central banks ramped up their support programmes. Elsewhere, policies remained much the same, although the US Fed tapered its quantitative easing as promised.

BlackRock über-strategist Russ Koesterich called things reasonably well, saying on December 31 2013 that investors may feel “a sense of déjà vu” as many of the macro factors seen in 2013 would persist.

But if rates rise in 2015, these could still be the managers who have the last laugh

Jeff Chowdhry, F&C’s emerging market equity chief, was less prescient, suggesting on December 19 that emerging markets could come “back in vogue” in 2014. The MSCI Emerging Markets index rose just 1.5 per cent in the year to December 11.

There were major flaws in the market consensus this time a year ago.

The December 2013 Bank of America Merrill Lynch Fund Manager survey found that 71 per cent believed the global economy would strengthen in the year ahead, although in many regions it did not. The survey also indicated a consensus to be long Japanese and European cyclical shares – not the best calls.

But the most conspicuously wrong were probably those suggesting interest rate hikes would trigger a 2014 bond market calamity. In fact, rates stayed low, government bonds continued to deliver, and credit markets were underpinned.

But if rates rise in 2015, these could still be the managers who have the last laugh.

That’s it for Investment Adviser this year, we’ll be back to kick off the general election year of 2015 with an issue on January 12. Thanks to all our readers and advertisers for their interest and support.

For now the entire Investment Adviser team wishes you a very merry Christmas and a happy New Year.

John Kenchington is editor of Investment Adviser