Given all they've endured in 2023, it will be little surprise if investors’ thoughts turn towards the new calendar year ahead of time. But this is also a good moment to look back as well as forward, particularly as this week is near enough the anniversary of one or two big shifts in investor thinking. The first, on 9 November 2020, was the so-called ‘vaccine Monday’, when news of an effective Covid-19 vaccine from Pfizer sparked a rally in equities on hopes of an end to the coronavirus pandemic. The second is still a few weeks away, but on 16 December it will be two years since the Bank of England (BoE) hiked rates to 0.25 per cent, the first of what turned out to be 14 consecutive increases.
There have been a few subplots since then: the surge in prices seen in 2021, the sell-off of 2022, and the mixed fortunes for most shares outside the 'magnificent seven' this year. Still, the continued focus on all things US means it will surprise some to learn that the UK's FTSE 100 has outperformed the S&P 500 and the Nasdaq Composite in the three years since the Pfizer news, and since that first BoE hike in 2021. This is the case both in local currency terms and in sterling – the latter denominator factoring in the relative weakness in the pound.
Many will point to the more serious struggles suffered by smaller companies. Here too, the price action isn’t quite so damning. The FTSE Small Cap index is slightly ahead of its US equivalent, the Russell 2000, over both time periods and in both local and sterling currency denominations. FTSE 250 performance has been poor, but it’s not so far behind the MSCI World mid-sized equivalent.