When compared to previous rallies in the UK market, there are a number of clear differences. In May 2012, markets were reeling from concerns over Greece possibly causing a collapse of the eurozone. Markets rallied to reach a new post financial crisis high, but it took a year to do so. The main drivers of the rally were technology, consumer services and financials. However, unlike the recent rally most sectors made a decent contribution to the overall market rise, with only the materials sector posting a small drop. Context is important when reviewing market performance, and here the scars of the financial crisis were still very fresh, consumer confidence was still weak and the banks were still vulnerable to sell-offs and scares.
In October 2015, markets initially plummeted as global growth fears, combined with an Ebola scare in the US, panicked markets. The recovery this time was a bit quicker, and by the end of April 2016 the markets had reached new highs in the UK. Technology was once again the best-performing sector, followed by consumer services. The performance was less spread out than in 2012, but was nowhere near as concentrated as we have seen over the last few months.
The speed and extent of this most recent rally has caught many investors unaware. In recent years, only the rebound in markets following the financial crisis has been quicker, and that was from very depressed levels and the rally was nowhere near as steep. After nearly eight years of quantitative easing and central bankers guiding markets, a different story has begun to restore investor confidence and this has led to the fastest rally in recent years.
Adrian Lowcock is investment director of Architas
Key points
There was a lot of volatility in stocks in the immediate aftermath of the EU referendum.
Once the initial concerns over Brexit faded the market did recover.
Oil and gas and mining have continued to drive the performance of the market as Donald Trump has taken office.
