Investment - Articles - NFU Mutual look back at 2019 and a brief look ahead at 2020

 “If we look at the FTSE100 for example, before the election it had a daily move of two per cent or more on six occasions this year.

 “In 2009 it moved more than two per cent more than 20 times, and the same happened in 1999. In the modern world, things feel more volatile than they are.

 “The perception of volatility is more to do with access to information. Stocks look like they move around a lot more when you’re watching them hour by hour on a smartphone, rather than looking at the prices once a week in the paper.”

 The impact of central banks

 Matthew added: “There’s been a bit of a slowdown in the global economy in 2019 and it has probably affected people’s confidence.

 “The knock-on effect is that central banks – whether they’re in the UK, US or Europe – have assessed the economy and cut interest rates.

 “This time last year it looked like the US Federal Reserve were going to raise interest rates, but midway through the year that wasn’t on the cards, and now it has cut interest rates.

 “A lower rate of interest means you’re more likely to invest in equities, so that central bank action has supported markets.

 “So there has been a juxtaposition in 2019 – it’s been a volatile time politically, but the markets have remained calm.

 “The political uncertainty means people are a bit less confident, that takes momentum out of the economy, central banks spring into action, lowering interest rates, and that supports asset markets. That’s how political volatility can create a calm market.”

 Donald Trump and US/China trade war

 “The noise around Donald Trump used to have an impact but now the market has almost become immune to it.

 “When Trump first started tweeting, people reacted to it, but now it just washes over because many realise it won’t necessarily lead to action.

 “The US-China trade wars do still cause a bit of day-to-day gyration but there is fatigue. Now, a lot of those moves are smaller, because over time these things have less of an impact.”

 Hong Kong protests

 “In terms of politics, one thing that has had an impact is the Hong Kong protests.

 "It won’t have affected many UK investors, but if you’re invested in a fund that has a high percentage of Asian assets, it may have underperformed slightly.

 “In general, however, the political noise hasn’t derailed global markets.” Technology shares boosts US market

 “UK equities are offering double digit returns and the UK bond returns are nearly 10% – it’s been a strong year.

 “But US equities have risen more than 20% for the year-to-date, and one of the main reasons is that technology shares have performed well.

 “Any technology business – like Amazon – with a long duration, in this time of low or declining interest rates, is likely to do well. That’s had a positive impact on the US market.”

 Woodford saga

 “It has had an impact on a stock-specific basis, because he built up reasonable stakes in markets. It would also be unsurprising if headline-grabbing events whittled away investor confidence.”

 Looking ahead to 2020

 “We can still be reasonably optimistic about the performance of shares in the medium-term.

 "But when you think about what has happened this year, the markets have done well because of that central bank support.

 “Going into 2019 investors weren’t expecting central bank support so it’s been a positive surprise that has aided markets.

 “You can’t see that happening again next year because there’s not much room for the central banks to do much more.

 “Asset markets have performed well in the short-term, but central banks have used up their surprise element.

 “If 2020 sees a repeat of political and economic volatility, you would then expect volatility in equity markets.”

 But potential impact of UK’s December election

 “There was an initial positive reaction from UK equity markets, especially from domestically focused businesses.

 “Investors generally like certainty and therefore the fact we now have a government with a clear majority will be welcomed.

 “International money has been avoiding the UK equity market which has underperformed compared to the US especially. This could lead to a reversal of this trend.”