29th December 2014
The past 12 months have been a period of change and then some. The fall of oil and iron ore prices, the collapse in Russia’s fortunes and Tesco’s accounting irregularities have surprised everyone. Guy Foster of wealth manager Brewin Dolphin reflects on the biggest shocks that 2014 threw up…
Few anticipated that there would continue to be so many buyers of bonds relative to other asset classes. Investors seem unperturbed and unconstrained by the poor returns on offer, with historically low yields and still falling.
Russia’s status collapsed as it went from host of the Winter Olympics, which celebrates international sportsmanship, to global pariah. Russia’s fall from grace has undone a decade of economic reform and returned her long suffering people to face their seemingly terminal fate of high inflation and low growth.
Whilst a decline in sales performance by the major supermarkets was expected in the wake of rapid gains by Aldi and Lidl, the magnitude of the decline and the significant impact on profitability of Tesco in particular took the market by surprise. The discovery of accounting irregularities shocked everyone and compounded the issue.
An organisation that was once a beacon of probity has truly stalled beset by three profit warnings, growth challenges and credit woes.
George Osborne’s surprise Spring Budget announcement certainly caught the life insurers on the back foot. Many are attempting to adjust their business models in time for April next year when the main changes take place. Retirees will be able to draw as much of their pension as they wish at their marginal rate of tax after taking their 25% tax-free lump sum. We continue to like those companies which were well placed going into the reforms and those which have the versatility to weather the changes.
We were not surprised by the direction; however the sheer magnitude of the falls in iron ore prices were rather astonishing. Supply growth was better than expected while demand growth was lacking, resulting in a larger surplus than we and the market were forecasting for 2014.