The year just ended should have been a time for celebration as we emerged from beneath the shadow of the pandemic. Instead it feels like one we need to forget. Shares were buffeted by the war in Ukraine, the energy crisis, rising inflation and a faltering economy. In the end the FTSE 100 Share Index recorded one of the better performances amongst world markets, but it still fell overall. Even so, a 6.5% fall adjusted for the US dollar compares well with a fall of 18% in the S&P 500 Index and a near 20% decline for China and emerging markets.
As it happens, our benchmark index has been making up for lost time since the start of 2023, surging ahead in early trading. Behind the uplift in sentiment was the belief that China is once again open for business as Covid restrictions are eased. This helped oil and airline stocks in particular and we also saw European bourses enjoy renewed investor support, despite the warning from the International Monetary Fund that a third of the world would enter recession this year. Perhaps the Santa rally is coming late this year.
Forecasting, as I constantly remind anyone prepared to listen, is a mug’s game. Peering into a crystal ball this time last year would not have warned of the impending invasion of Ukraine or the sharp rise in energy and food prices that resulted. Looking ahead to the year to come, there are too many unknown unknowns to make a serious judgment on likely outcomes. With little sign of an end to hostilities between Russia and Ukraine, it is hard to imagine from where a sudden boost to confidence might emerge.
But if there is one crumb of comfort to take into account in such an opaque outlook, it is that we are much better at reacting to events than used to be the case. Misjudgements or unexpected developments are now taken account more swiftly than was the case in the past. Witness the speed at which the unfortunate budget plans of our shortest lived Prime Minister were overturned. And there is more international cooperation these days. There are reasons to hope for a happy 2023 for investors, but I will still be keeping my fingers crossed.
