While many forecasters expected some gains, the surprise has been where those have come from. This year's winners are mature economies, a recovering Europe, UK consumer sectors and medium-sized companies. In contrast, the biggest companies, gold, defensive sectors, the US dollar and emerging markets have not performed as expected. So, what can investors learn from this year's stockmarket surprises?
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It has not been the big macro-economic calls that have paid off, but an understanding of how expectations can change. Institutional investors have moved money and cut exposure to areas such as the biggest US growth companies, where prospects look fully valued.
The encouraging sign in the markets is that investors have begun to focus on valuations, recognising that major UK and European companies have lagged behind their US counterparts.
There is more recovery potential to come in the UK and Europe, but many global investors have not recognised the possibility of Europe overcoming its problems. It is clear that Greece, Cyprus, Portugal and Slovenia are still struggling and may need more help.
However, it suits Germany and France to support these countries, as the alternative of refinancing many banks and insurers on a default by peripheral Europe would prove much more expensive. Germany is achieving major savings in interest costs which dwarf the cost of the rescues.
Moreover, plans for harmonising bank regulations and capital across Europe will make resolving future bank failures much simpler. Europe is being rewarded with some strong share price performance, signs of inflation returning to the German property market, and a two-year high for the euro versus the dollar.
This renewed dollar weakness, in the aftermath of the government shutdown, looks set to run further. Unless the US economy moves on to a stronger growth path, and its budget issues are resolved, investors may look for safer currencies.
Continued US money printing is keeping an ample flow of dollars, and the renewed weakening in the oil price is also easing some pressures on emerging economies.
Few at the start of the year would have forecast that the UK might be one of the property hotspots. Yet, the latest figures for year-on-year gains in house prices show London and the South East running at over 13%, ahead of China's average. Chinese buying is a feature of the London house market this year, suggesting that the same bubble is at work.
British consumer confidence is much stronger this year, wages have risen strongly in private sector services, and the savings rate has dropped. The remarkable strength of the pound over the past three months has eased import costs and petrol prices.
Investors should recognise the potential for further recovery in Europe, which has not yet matched the progress the UK has made. Actual growth may be weak, but the key is in the valuations of European shares, and the low expectations. International investors may still have too much in the US and in emerging markets. Stockmarkets still have the potential for more surprise.
- Colin McLean is managing director of SVM Asset Management