The FTSE 100 has spent 2014 going nowhere fast. At around 6700 today, it is almost exactly where it was 12 months ago.
There has been volatility along the way, but that still leaves the index 3.2% off its 52-week high of 6878.
Frankly, given the headwinds out there, it could have been a lot worse.
When even Prime Minister David Cameron is publicly warning of a second global crash, the fact that the index has held steady is a remarkable performance.
Tough Times
The FTSE 100 has had to tough out the Chinese credit and property bubble, continuing eurozone calamity, Islamic State’s emergence, Vladimir Putin’s Ukrainian adventures and ever-spiralling Western debt.
It has also survived the end of QE3, after the US Federal Reserve finally ceased its six-year programme of monthly bond purchases in October. Today, it is close to fair value, trading at just over 15 times earnings and yielding nearly 3.5%.
Can it go one better in 2015?
Rates Ain’t Rising
The main reason markets are hanging tough is that they know they have serious back-up, in the shape of central bankers, who are still passing them plenty of monetary ammunition.
The Fed has stopped buying bonds, but it still plans to hold interest rates low for a “considerable period”, to head off the threat from the slowing global economy.
The first rate hike may still come next year, but the Fed will move slowly to avoid spooking markets. With falling oil prices defusing inflation, the pressure is off.
It will be the same story in the UK, where the first base rate hike keeps getting pushed back and back. As growth slows, Simon Wells, chief economist at HSBC reckons we can wait until 2016.
QE Forever
There won’t be any interest rate hikes in the eurozone next year, where markets still believe European Central Bank president Mario Draghi will launch his final weapon, €1 trillion of QE.
In Japan, premier Shinzo Abe has already unleashed his spending blitz, which helped lift global markets, including the FTSE 100, out of their October slump. More will follow, with the country slipping into a quadruple dip recession.
This certainly isn’t pretty. I would rather markets were rising on the back of rising economic confidence and growth, but that is in short supply.
Easy money should keep the FTSE 100 buzzing in 2015, but we need stronger signs of recovery for it to really fly.