2009 – a terrifying roller coaster of recession and recovery
Leon Watson, December 30th, 2009
VOLATILE, scary and momentous – this is how 2009 will be remembered.
With the year drawing to a close, the consensus is clear: 2009 will go down in history as something VERY different.
The turbulent 12 months has been very good and very bad for traders.
It has seen the incredible lows of March, when the FTSE hit rock bottom, and last month’s alarming debt crisis that engulfed Dubai.
According to some, there has even been a seismic shift of economic power from Europe and the US to China and the East.
And yet there has also been great moments of international co-operation – and non-co-operation – like the G20 summit and more recently the Copenhagen climate change conference.
Speaking to 247Bull.com, Selftrade analyst Stephen Barber revealed what he’ll remember 2009 for.
He said: “It has got to be the effects of the credit crunch and global economic crisis that started and ended the year.
“The G20 meeting in London in April could have had a damaging effect on the economy but ever since then the FTSE has had a tremendous run.
“This has created a new optimism but there’s also been a certain disengagement between this optimism in the markets and the ongoing economic problems.
“It is this I think that will characterise the year. It seems quite different from the dot com crash when a lot of investors exited the market after having their fingers burned.
“This time private investors seem to be more sophisticated and have instead looked at a lot of different sectors and instruments despite it being a very volatile market.
“Basically, for those who were brave enough it has been a good time to be in the market.
“For me the big event has to be the G20 meeting. That really will have a long historical impact in my opinion.
“It was a time when global co-ordination and co-operation came to the fore and the G20, which has been around for a number of years, finally became more important than the G8 or the G7.
“That meeting marked a significant change. The power is shifting away from the cosy arrangement of Europe and the US as the China-led East plays an ever more prominent role.”
As for big numbers we’ll be talking about in years to come, Mr Barber added: “I’ll probably remember the growth figures most – or lack of them.
“But we’ll also remember the FTSE shooting up by 50 per cent, the amount of quantitative easing and the billions poured into financial institutions and economies around the world.
“Then there’s inflation near to 0 per cent and interest rates at 0 per cent, or below in real terms. They’re also big things to remember.”
Speaking about what sectors have prospered, Mr Barber said: “Quite a lot have been very impressive and overall the market has done well.
“By that I particularly mean pharmaceuticals and biotechnologies have impressed and on the global geographical scale China and Brazil.”
Stephen Pinner, from SimplyStockbroking, pointed to the FTSE’s rebound as “one of the most powerful in history”.
He said: “Historically, every boom and bust for every economy and stock market has delivered unprecedented changes in the financial landscape, accompanied by a raft of new terminology and jargon.
“The credit crunch recession certainly obliged, providing a series of unprecedented shocks and new thinking, such as the concept of financial institutions being too big to fail, shorting bans in financial stocks, near 0 per cent interest rates, and moral hazard.
“As we approach the end of this year, politicians are now attempting to avoid a double dip recession and/or stagflation.
“The UK economy managed to clutch defeat from the jaws of disaster as Q3 delivered lower GDP growth than expected, although it was generally expected that the final quarter of 2009 would see the economy out of recession after six quarters of contraction.
“The headwinds we still face include balancing falling tax receipts and heavy borrowing to bailout and support the banking sector, with ever increasing demands on the Exchequer as unemployment continues to take its toll.
“The only crumbs of comfort have finally come with a drop in claims for Jobseeker’s Allowance, one of the last statistics for this year and the first sign that unemployment is soon to fall.
“But in fact this is highly significant because these statistics have provided absolute confirmation of the old stock market rule that the time between the low in stocks and the peak in unemployment/end of recession is about a year to 18 months.
“On this occasion we may actually be ahead of schedule.
“The FTSE 100 hit its low near 3,500 in the first week of March, and has delivered a V-shaped rebound, in fact one of the most powerful in history.
“Ideally, that V-shaped bounce will continue in a similar fashion to the recovery from the low of March 2003, which in turn led to a four-year bull market.”
This year will be remembered as the time when we teetered on the edge of complete financial meltdown.
Fortunes have been lost – but fortunes have been made as brave investors jumped on board when economies began to bounce back.
Chris Hossain, senior sales manager at ODL Securities, said: “History could well point to 2009 as one of the most pivotal moments in modern times.
“While we narrowly avoided catastrophe, the hard realities that have had to be endured over the past year may well mould a whole new generation of investment.
“The March lows were a nadir in terms of numbers and morale – and if you believe everything you read, we came terrifyingly close to financial Armageddon.
“The fall was spectacular, but as with any crash, the rebound was almost more spectacular.
“The returns for market bulls have been immense in the latter part of 2009, albeit as with any investment, it is all about timing, and holding your nerve.
“Hindsight is a wonderful thing – how many of us saw Barclay’s at 50p and thought it couldn’t go much lower, but still stayed away?
“How many of those people that bought in at the lows are still in now, nearly 400 per cent higher?
“The fall and the subsequent rebound will live long in the memory but talk of new bubbles is already surfacing.
“Will we be saying in 12 months that we have learned the lessons from 2009? Or will it be another roller coaster ride?”
So what exactly are analysts predicting for 2010? Find out next week on 247Bull.com.
Tags: 2009 Review, Chris Hossain, FTSE, G20, ODL Securities, Recession, Recovery, Selftrade, SimplyStockbroking, Stephen Barber, Stephen Pinner, Traders
This entry was posted on Wednesday, December 30th, 2009 at 7:15 pm and is filed under Blog, Featured.