Global stock markets have posted their best year since the aftermath of the financial crisis a decade ago, as investors shrugged off trade tensions and warnings of slowing growth in major economies.
The MSCI World Index, which tracks stocks across the developed world, jumped by almost 24% during 2019 – the strongest performance since 2009. A surge in US technology giants and a strong recovery in eurozone and Asian stocks drove the rally.
Britain’s blue-chip stock index – the FTSE 100 – jumped by 12%, its best performance in three years, thanks to a late influx of funds following December’s general election. The index ended the year at 7,542 points, up from 6,728 a year ago. The recovery will be welcomed by investors who suffered from a 12.5% slump in 2018.
Retailer JD Sports was the best-performing FTSE 100 stock of the year, gaining 140%, followed by IT firm Aveva which rose by 90%. The London market also benefited from a post-election bounce. The FTSE 100 rallied by 370 points, or 5%, in the two weeks after the Conservative victory. This added nearly £100bn on to the index, as traders flocked to buy shares in UK firms including banks and housebuilders.
The FTSE 100 index is now less than 5% away from its record high, 7,903 points, set in May 2018. John Moore, senior investment manager at wealth management firm Brewin Dolphin, believes it could set fresh records in 2020.
“The ingredients are there for the FTSE 100 to hit a new high. In comparative terms, UK companies look undervalued and the reasons for not owning UK assets are starting to dissipate. That could precipitate a return to UK equities for investors who previously sold them off,” Moore said.
London fared relatively badly compared to other markets in 2019, however. The S&P 500 index of top US companies has surged by 28% this year, hitting a series of record highs, as Donald Trump’s tax cuts, share buybacks and optimism about US growth prospects boosted markets in the world’s largest economy. The tech-dominated Nasdaq index, whose stocks include Netflix, Facebook and Amazon, posted a rise of 35% over the year – with Apple leading the way by surging 84%.
Eurozone stocks also outperformed, with Germany’s Dax and France’s CAC both up 25%. Japan’s Nikkei gained 18%, helped by the prospect of new stimulus by Shinzo Abe’s government.
China’s CSI 300 stock index romped ahead by 36% during 2019, as Beijing cut borrowing costs and hiked spending on construction and infrastructure projects.
Stock markets surged despite warnings from the International Monetary Fund in 2019 that the global economy was in its weakest state since the financial crisis a decade ago. The IMF downgraded its forecasts for 2019 and 2020 in October, citing central banks’ limited ammunition to tackle a slowdown and the impact of the US-China trade war. However, Donald Trump announced on Tuesday that a phase one peace deal in the dispute between the word’s two largest economies would be signed this month.
During the eurozone crisis, the idea of Greece’s stock exchange outpacing the rest of Europe would have been an outlandish prospect. But as 2019 drew to a close, the Athens bourse was – by some distance – the best-performing European exchange.
The Athens General Index (ATG) of Greece’s 60 biggest firms gained nearly 50% to 916 points during the last 12 months. Investors returned to Greek stocks after the country’s bailout ended in August 2018, after a grim eight years of deep spending cuts and tax rises. They also welcomed its pro-market rightwing government which took power in July, succeeding the leftwing administration of Syriza and prime minister Alexis Tsipras.
But long-term Greek investors have still suffered badly. Back in 2007, when the credit crunch struck, the ATG was trading at over 5,200 points – more than five times its value today. It was still at 2,000 points when the first bailout request landed in 2010.
Global markets have recovered from a late wobble in autumn 2018, when fears of a global downturn hit stocks. Stocks rallied once it became clear that the US central bank was backing away from further interest rate rises. Indeed, the Fed abruptly reversed course with three rate cuts, and also began expanding its balance sheet again.
Kyle Rodda, analyst at IG, a City spreadbetting firm, said 2019’s big takeaway for investors around the world was “don’t fight the Fed”.
“2019’s record-setting year for the S&P 500, and even that of Australia’s ASX200, has been underwritten by increasingly accommodative monetary policy from the US Federal Reserve,” Rodda said.
Sterling strengthened over the year, although it was a choppy ride. The pound started 2019 at $1.275 against the US dollar, falling below $1.20 by early September as the City feared a disorderly Brexit.
It then rallied, spiking at $1.35 after Johnson’s election success, but ends 2019 at $1.31 as investors anticipate tough negotiations with the EU over a free trade deal.
The price of gold jumped to $1,525 per ounce, up nearly a fifth during the year. That’s its biggest annual rise in nearly a decade, as some nervous investors looked for a safe haven for their capital. Palladium hit a series of record highs, as demand for the precious metal in automobile exhaust systems exceeded supply.
