Monday, 15 December 2014

So much for the Santa Rally in 2014

Chart forFTSE 100 (^FTSE) 

So much for the Santa Rally this year. Normally Fund Managers and other asset investors are keen to lock in their gains for the year  to get their all important bonus' paid. This means that quite often the FTSE and other world indexes end the year at their highest point - often only to have a bad month in January when the managers come back to work and take a look at reality. 

This year though the collapse in the oil price, trouble in Ukraine and across Syria and Iraq, together with slowing growth in China and no growth in the Eurozone has well and truly spooked the markets.

Instead of a Santa Rally, we have a Christmas collapse, with little sign of much news getting better as the above intractable situations are no closer to being fixed. Indeed, all may get worse before they get better.

Having said that, Oil prices will feed through to growth in the West as they act as a benign deflator of goods and services - it will take one or two quarters to feed through so we won;t see it until March or so next year, but it should be worth up to 0.5% GDP for an industrialised Western country. 

With the markets more or less closing at the end of this week, there is not much time for a turnaround so it looks like it will be a losing year on the FTSE with UK GDP growth at 3% - a very odd turn out that. 


andrew said...

Clearly the Santa rally came in October / Finished Late Nov.
Global warming innit.

Diogenes said...

Perhaps they saw reality early.

3% GDP?