Firstly, Happy New Year to you all. I hope that you managed to have an enjoyable and restful festive period.
The FTSE 100 index increased
To start this market review with some good news, over the course of December the FTSE 100 index increased by 4.6%, which saw it reach its highest level seen since February 2020. Looking at 2021 as a whole, the index finished the year 14.3% higher. To put this in perspective, this was the best performance over a calendar year since 2016. Of course, this is good news for those investments that we look after with a stocks and shares element.
Having said this, at the start of December the news of the Omicron variant saw the markets wobble, with concern over how this may affect investments. At this time, there were fears over how contagious this variant was, and the governments across the UK brought in fresh restrictions. This caused a degree of concern on how this would affect the already struggling hospitality and leisure sectors.
The inflation and the consumer price index continued to rise in the UK
Inflation has continued to increase in the UK and the annualised rate of consumer price inflation rose to 5.1% in December, driven largely by continuing high costs for transport and energy. The Bank of England’s (BoE) Monetary Policy Committee somewhat surprisingly increased the base rate to 0.25% from its historical low of 0.10%, a move that was expected in November. The surprising element was not the increase, but the timing, as earlier in the month, the BoE had warned of the impact that the Omicron variant could have on the UK economy. It is widely expected to continue tightening its policy measures over 2022.
In the US...
Much like the UK, all the major global equity markets saw increases during 2021. The Dow Jones Industrial Average Index in the US closed December 5.4% higher, and saw an annual increase of 18.7% over the year.
Again, as was seen in the UK, inflation continued to surge in the US, led by energy and food prices rising. Their consumer price inflation rose to 6.8% during November, a rate not seen in the US since 1982. There is now expectation that the Federal Reserve will look to increase interest rates during 2022, with some policymakers forecasting anything up to four rises.
In the Eurozone...
The Eurozone was no different, as high energy prices affected the annualised consumer price inflation that rose to 4.9% in November. However, the European Central Bank continues to see the current inflationary pressures as a temporary issue, caused by the global pandemic. In Germany, the Dax Index went up by 5.2% during December, and closed 2021 15.8% higher.
We hope that 2022 sees an end to the restrictions when it is safe to do so, and we finally return to a sense of normality. As always, if you have any questions in regards to your current investment portfolio or any other financial planning matter, please do get in touch with us.
Who should you contact for more information?
Director Richard Brazier
Financial Adviser Amanda Beacon
Senior Consultant Graham Smithson