“The bears have killed Goldilocks.” If the year continues as it started, this heading on an early January note from forecasters at the Royal Bank of Scotland (RBS) could prove a fitting epitaph to the decline of equity markets that started in summer 2015.
If the RBS view is correct, we are back in 2008 territory. Its analysts project major threats facing the global economy including further problems in China; a continuing commodities slowdown led by the falling oil price; the prospect of deflation; sovereign debt weighing upon growth; and automation destroying jobs. Those in the investor community on social media don’t appear to be entirely convinced by the comparison with 2008; the overall reaction seems to have been ‘it is not as bad as that’. But it may be useful to add a ‘yet’ in there.
While we lack information on how the average private investor has fared in these troubling times for growth assets, we have a proxy: the average performance of open-ended UK equity funds. It is not pretty. According to investment data provider Morningstar, these funds delivered an average total loss of 9.1 per cent in the year to 20 January. Investors may have been better in a tracker fund. Over the same period, the total return on the FTSE All-Share was minus 4.8 per cent.